PELOTON INTERACTIVE, INC. — Call Transcript 2026

Good Day, and welcome to Peloton's Q3 Fiscal Year 2026 Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. James Marsh, Head of Investor Relations. Please go ahead. Thank you, operator. Good morning, and welcome to Peloton's Q3 Fiscal Year 2026 Conference Call. Joining today's call are Peloton Chief Executive Officer and President, Peter Stern, Interim Chief Financial Officer, Saqib Baig, and Vice President of Financial Planning and Analysis, Scott Burch. Our comments and responses to your questions reflect management's views as of today only and will include forward-looking statements related to our business under federal securities law. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business. Please refer to our SEC filings, today's press release, and our earnings presentation, all of which can be found on our investor relations website, for a discussion of our material risks and other important factors that could impact our results. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures and definitions for our user metrics are also provided in today's press release. I'll turn it over to Peter. Thanks, James, and good morning, everyone. Our Q3 results are proof that the strategy of evolving Peloton from a connected fitness company to a connected wellness company is delivering results. This strategy is in direct response to consumers not only wanting to add years to their life, but also life to their years. Peloton's content, equipment, and beloved brand position us to capture more market share within the growing $7 trillion global wellness economy and to achieve ever greater human impact. As I've shared in prior calls, there are four pillars to delivering on our strategy. One, improve member outcomes. Two, meet members everywhere. Three, make members for life. Four, business excellence. Let's start with our progress on improving member outcomes, which is how we empower them to live fit, strong, long, and happy. During the quarter, over 400,000 people took our highlight classes with Rebecca Kennedy. This contributed to 48% growth in our Pilates modality, which is becoming a central plank of our strength program and an area where we are investing both in R&D and instructors, as exemplified by the three we onboarded last quarter. Speaking of R&D, our work on producing new equipment in one of our existing modalities is progressing well, and I look forward to introducing some exciting new hardware and features to you this fall. In the space of mental well-being, last week, we launched 140 Peloton instructor-led meditation and sleep classes in the Breathwrk app, as well as daily meditations and Breathwrk programming that will begin to develop that app into a preeminent platform to help people relieve stress, sleep, and achieve better focus. To further our progress in improving member outcomes, I'm delighted to celebrate the arrival of Sarah Robb O'Hagan, our Chief Content and Member Development Officer. Sarah brings a wealth of experience serving in executive and board of director roles for various well-known brands in the fitness space, including EXOS, Strava, Equinox, Gatorade, and Nike. Sarah is focused on accelerating innovation across our content ecosystem, driving engagement, and in so doing, deepening loyalty across our community by evolving the member experience. Second, let's talk about our strategy for meeting members everywhere. This part of our strategy is how we grow our Peloton community. Last week, we announced big news in this area, our content licensing partnership with Spotify. This partnership brings more than 1,400 Peloton classes across strength, Pilates, barre, yoga, meditation, outdoor, and cardio to hundreds of millions of Spotify Premium subscribers globally, exponentially growing our reach. Our work with Spotify provides a powerful entry point into the magic of Peloton, allowing us to efficiently grow our brand through a platform that people everywhere already know and love, while also providing a high-margin, diversified revenue stream. We expect to bring hundreds more classes to Spotify Premium subscribers each month. Our commercial business unit is another way we can meet members everywhere by reaching people in tens of thousands of gyms across more than 60 countries. In Q3, we delivered another quarter of standout growth in this unit, as revenue increased 14% year-over-year. To build on this momentum, we recently announced the Peloton Commercial Series, which includes a new bike and treadmill specifically designed for heavy traffic gym environments. This equipment, which brings together Precor's industrial-grade durability with Peloton's unsurpassed connected experience, will become available to gym operators in Q2 of fiscal 2027 and will help us continue to grow Peloton's international footprint and gym presence. We see tremendous upside in this category as we estimate that we have only a 3% share of the more than $10 billion and growing global commercial fitness equipment market segment. I'd be remiss if I didn't mention our recent ad campaign featuring Adrian Williams. This campaign went viral because it's a glorious demonstration of the joy of movement that drives everything we do at Peloton. I want to congratulate Peloton's marketing team, led by Megan Imbres, which have delivered more than 60 million organic social views and significant global earned media buzz, helping us put Peloton back in the center of the zeitgeist where we belong. Third, let's talk about our strategy of Members for Life. This is where we work to keep the members we have. Initiatives such as Club Peloton, personalized plans from Peloton IQ, and some reactivation offers we implemented in Q3 helped us deliver net churn that was 7 basis points lower year-over-year in Q3, despite the price change we implemented in Q2. These results demonstrate the substantial value we provide to our members. Last, but certainly not least, is our strategy of Business Excellence. I believe the numbers here speak for themselves as we achieved an important milestone of positive year-over-year revenue growth in Q3, along with growth in gross margin, adjusted EBITDA, and free cash flow. Free cash flow increased $56 million, or 59% year-over-year. While our Q4 expectations reflect that our path to sustained year-over-year revenue growth will not be linear, the underlying vectors of growth have never been clearer. As our business model evolves, we expect investors will see our growth materialize in total revenue first, driven in part by revenue streams like the commercial business unit and content licensing. I'm also pleased to share that we expect Peloton to achieve positive net income on a full year basis in fiscal 2026, in addition to our previously stated goal of positive operating income. This would be the first time in the company's history that we have achieved either of these metrics for a full year, let alone both. We have right-sized our cost structure, in particular G&A, and are now delivering in excess of $1 million of annualized revenue per employee. We are well-positioned to continue delivering innovations in cardio, strength, commercial, mental wellbeing, content licensing, and beyond within a disciplined envelope for R&D spend. Strong financials and consistent cash flow have resulted in a vastly improved balance sheet. We ended Q3 with a 70% reduction year-over-year in our net debt. Add all this up, from a financial standpoint, we are no longer operating defensively. Instead, we are operating from a position of profound strategic optionality. This enables us to move to a new stage of financial maturity characterized by strategic capital allocation. In anticipation of the expiration of the prepayment penalty on our term loan at the end of this month, we're evaluating every avenue to maximize shareholder value, including debt optimization, capital returns, and accretive strategic investments. With meaningful excess cash on the balance sheet, we have the luxury of patience. We are actively finalizing our holistic capital allocation strategy, evaluating alternatives including share repurchases, debt optimization, and potentially highly targeted investments. Finalizing and executing on this plan will be a key agenda item for our permanent CFO once they are seated. Speaking of a permanent CFO, our search is progressing well. We have met numerous qualified candidates, and we are gratified by the strong interest they have shown in Peloton. As I wrap up these remarks, I want to reiterate my confidence in Peloton's future. We continue to make great progress on deepening our relationships with our members, growing our opportunities to reach new members globally, diversifying our revenue streams, and planting new seeds for future growth, all while continuing to strengthen our financial foundation. With that, I will now pass it over to Saqib, who I'm very grateful to for serving so ably as Interim Chief Financial Officer and who will share more details on our financial results. Thanks, Peter. In Q3, we achieved total revenue of $631 million. This exceeded our guidance by $6 million and represents positive year-over-year growth. Our performance relative to guidance was driven by higher connected fitness equipment sales across Peloton and Precor brands. We ended Q3 with 2.662 million ending paid connected fitness subscriptions, in line with the midpoint of our guidance range. Q3 average net monthly paid connected fitness subscription churn was 1.2% and improved 7 basis points year-over-year. Moving to gross profit and gross margin. As a reminder, in Q1 of fiscal 2026, we began assigning executive compensation and other corporate overhead expenses associated with corporate facilities across the P&L as we focus on driving more accountability from cost at a functional level. Prior to fiscal 2026, these costs were all recorded to G&A, but are now assigned to COGS, sales and marketing, G&A, and R&D. All of the year-over-year changes discussed today reference last year on an as-reported basis. Total gross profit was $327 million in Q3, an increase of $9 million or 3% year-over-year. Total gross margin was 51.9% in Q3, an increase of 90 basis points year-over-year and 210 basis points below our guidance of roughly 54%. Lower total gross margin relative to guidance was driven by opportunistic promotions across our connected fitness equipment sales. We operate within strict LTV to CAC hurdle rates, and as we saw a 2x LTV to CAC ratio, we seized an opportunity to get more aggressive. Please refer to our investor presentation for the segment-level breakdowns for revenue and gross margin. Total operating expenses, excluding restructuring, impairment, and supply settlement expenses, were $267 million in Q3, a decrease of $50 million or 16% year-over-year, reflecting the continued progress we have made in rightsizing our cost structure. We remain on track to achieve at least $100 million of run rate cost savings by the end of fiscal 2026. We also continue to deliver strong profitability with $126 million of adjusted EBITDA, an increase of $37 million or 41% year-over-year, and close to the midpoint of our guidance range. Q3 free cash flow of $151 million represented an increase of $56 million or 59% year-over-year. Turning to our balance sheet. We ended the quarter with a strong cash position of $1.13 billion, a decrease of $53 million quarter-over-quarter. This decrease was driven by paying down roughly $200 million of convertible debt when it reached maturity in February, partially offset by strong cash flow generation in the quarter. The significant progress we have made in profitability is reflected in our net debt of $173 million, which decreased $412 million or 70% year-over-year. Similarly, our gross and net leverage ratios have improved meaningfully to 2.9 and 0.4 respectively. As Peter mentioned, we are focused on strategic capital deployment. A key element of this is managing dilution through a disciplined approach to equity compensation. Our stock-based compensation expense decreased $15 million or 22% year-over-year in Q3. Next, I would like to take time to provide context for the financial outlook for the remainder of the fiscal year. Our full year fiscal 2026 total revenue outlook of $2.42 billion-$2.44 billion reflects an increase of $10 million at the midpoint compared to prior guidance and 2% revenue decrease year-over-year at the midpoint. The increase related to prior guidance is primarily driven by higher equipment sales observed in Q3. It is worth noting the anticipated content licensing revenue associated with Spotify partnership we announced last week was already reflected in our prior revenue guidance and will be recorded to the subscription segment. Our full year fiscal 2026 guidance for total gross margin is roughly 52.5%. Which reflects a decrease of roughly 50 basis points relative to prior guidance and an improvement of 160 basis points year-over-year. Our full year fiscal 2026 guidance range for adjusted EBITDA of $470 million-$480 million is in line with prior guidance and an 18% year-over-year increase at the midpoint. Our Q4 guidance range for ending paid connected fitness subscriptions is 2.55 million-2.57 million. Our guidance reflects an expectation that our average net monthly paid connected fitness subscription churn rate will be roughly flat year-over-year in full year fiscal 2026, despite the price change we implemented in Q2. Gross additions are expected to decrease year-over-year as a result of lower equipment sales. Generating meaningful free cash flow remains a top priority for us. We expect full year fiscal 2026 free cash flow to be in the vicinity of $350 million. I will now hand the call back to the operator for Q&A. Before I turn the call over to the operator, let me ask a couple questions from our Retail Investors. Our first question comes from the leaderboard named Vic83. His question is: Can you clear up some of the confusion around Section 232 tariffs? Are your products exempt? What is the new view on tariff impact for the year? Do we expect a refund on previously paid IEEPA tariffs? Peter. Thanks, Vic, for the question. Tariffs are, as you know, a moving target. We follow it closely. First, the equipment we manufacture here in the U.S. is obviously not subject to tariffs at all. For everything else, based on the tariff policies that are currently in place, imported Peloton and Precor hardware are no longer subject to the Section 232 tariffs on aluminum and steel content. They do remain subject to all other applicable tariffs, which include the MFN tariff as well as Sections 122 and 301. Regarding IEEPA, we're closely monitoring the updates from U.S. Customs and Border Protection on when we'll be able to submit our refund request. Our request is somewhat more complicated than the initial round of requests. We will submit that as soon as the CBP is ready to receive it. The changes that I just described, along with various inventory ins and outs, drive a net benefit to our tariff exposure. We expect tariffs to represent roughly $30 million of free cash flow exposure for our full year 2026, which is a reduction of $15 million relative to the $45 million that we shared last quarter. Thanks, Peter. Our second question comes from leaderboard named John H. Schreiber. Please provide an update on the company's capital allocation plan now that the balance sheet has been significantly improved, thanks to several quarters of positive free cash flow. Can shareholders expect a share repurchase plan to be announced soon? Peter. Thanks for this, John. It's amazing what a difference two years have made in the strength of our balance sheet. It's my great pleasure to address your question from where we sit today. As you may know, our $1 billion term loan has a $10 million prepayment penalty that expires at the end of this month. We haven't wanted to touch that until then. At the same time, we're accumulating cash on our balance sheet, thanks to our disciplined operating approach. At the end of the quarter, you heard Saqib say that we had about $1.13 billion in cash. That's after paying down the $200 million of convertible notes that came due during the quarter. We're now approaching zero net debt, we need a lot less cash than we have on our books to operate our business, given the steady cash flows that our subscriptions business in particular generates. All of this gives us what I referred to in the remarks as profound strategic optionality. We're working with our banking partners on our plan. We're not ready to discuss the details of that plan right now, this is ultimately something I want to craft in conjunction with our new CFO once they're onboarded. I'll tell you the 4-part framework that we're using. First, we're trying to reduce our cost of capital. Our current term loan was entered into at a different time and under very different circumstances, we believe there's an opportunity to improve our borrowing rates. Second, we're trying to increase our flexibility. Our current term loan limits our ability to engage in shareholder-friendly actions like stock buybacks, and we'd like to reduce those types of restrictions. Third, you heard Saqib talk about this, we're working hard to find ways to reduce dilution. There are lots of ways of achieving this. We're already taking steps by reining in stock-based compensation and by moving to net settlement of restricted stock units rather than selling to cover for some of our executive officers. We're evaluating what else we can do here, including your suggestion of a repurchase. Fourth and last, we're making sure that we have the capital we need to operate our business sustainably and to invest in our future. This includes rigorously vetted organic and potentially inorganic investments. We'll have more to share on all of this after we've concluded our CFO search, but we have the luxury of time given the strength of our balance sheet. Great. Thanks, Peter. Cherie, you can open the line for Q&A. Thank you. As a reminder to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, press 11 again. Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. Please stand by while we compile the Q&A roster. Our first question will come from the line of Simeon Siegel with Guggenheim Securities. Your line is open. Thanks. Hey, everyone. Morning. Peter, I just wanna make sure I understand the response to leaderboard member John. I don't remember the full name, but it was great. How are you thinking about the timing for the strategic actions? Are you suggesting it's a next month thing? Is it a wait for the CFO thing? Just any help on timing, giving the balance sheet really is in just such a different place than you were before. That's been great to see. Just a quick follow-up comment on the dilution, 'cause you mentioned it twice. I think you changed some approaches to how management's paid and incentivized late last year. Can you just speak to your philosophy around executive comp now and maybe what types of hurdles you think we should be judging you on going forward? Thank you. Absolutely, Simeon, and congrats on the new gig, and we are so happy that you're back in the family. Thank you. I'll take the first part, and then I'll have Saqib talk about dilution and some of the changes on comp. As I said, First of all, we do have the ability to be patient. It doesn't mean that we that we feel it. We feel patient, but we have the ability to be patient here. As you know, debt maturities can span many years. We think it's unwise for us to rush the process. In particular, I didn't talk about this in my answer to John H. Schreiber, we intend to go through a credit ratings process prior to doing any refinancing. We wanna make sure we do that right the first time. It will be the first time that Peloton gets rated. Of course, as you know, the rating has a very substantial implication on the rates that we would pay over the years of that new debt instrument. We think we get a better outcome, both on cost of capital and flexibility, if we're a bit patient and do it right, and certainly that includes having a permanent CFO in the seat. Once they're there, we would begin that credit rating process. We'll evaluate the results of that credit rating process, and that will basically guide the pacing of any further actions we take, including the refinancing. Why don't we, I'll go to Saqib now, and you can talk a little bit about the dilution questions. Yeah, sure, Peter. The impact of stock-based compensation on share dilution is top of mind, and reducing the dilution over time is a top priority for us. We are taking steps to reduce dilution. We are doing it through a net settlement program for equity vesting for select executives, as well as ongoing disciplined approach to equity compensation. Let me give a little bit more color on net settlement program. In that program, at equity vesting, the company would hold some of the vested shares rather than issuing and selling shares in the market to cover for employee taxes and delivers only the remaining shares to employees. Regarding our disciplined approach to equity compensation, you all can see that in the sequential improvement we have been making in our stock-based compensation expense. Stepping down from $300 million in fiscal 2024 to $230 million in fiscal 2025, we are tracking around $200 million in fiscal 2026. Looking ahead, we see this expense continuing to step down in fiscal 2027 and beyond. We have also taken significant steps to pay more on performance-based awards in our organization, and we have structured our SBC awards to better align with this approach going forward. One thing you guys can also note is we are awarding fewer RSUs over time. For example, if you compare our 10-K disclosure in fiscal 2025 versus fiscal 2024, you'll notice a substantial reduction in the number of shares granted. One thing I would also like to highlight, because the compensation structure has a multi-year grant, we recognize the benefit over time due to the impact of grants vesting from prior years. Operator next question. Great. Thanks, guys. Best of luck. One moment for our next question. That will come from the line of Arpine Kocharian with UBS. Your line is open. Hi. Thanks, and good morning. Churn has surprised to the upside for more than three, four consecutive quarters for Peloton here. Peter, do you see churn trend stabilizing enough for you to then think about the delta between subscribers that are churning annually versus gross adds? How you look to close that gap over time? Thanks, Arpine. We feel good about our Q3 churn results. Ultimately, your question goes to, I think, you know, when do we reach the point where the two lines of our gross adds and our subscriber churn cross such that we get to net adds and subscribers. Let me talk a little bit about what we're seeing there. On gross adds, while the number is still declining, the year-over-year rate of decline in gross adds in Q3 of this year is lower than last year. We're seeing a decelerating rate of decline. On churn, after adjusting for the impact of our pricing changes, we're also seeing that our net churn rates are improving on a year-over-year basis. Putting those two things together, right? If that keeps changing in the ways that I've described, then we would start to see subscriptions growth. A big goal for us as a management team is on how we accelerate the pace at which that convergence happens while making sure that we do it in a sustainable and profitable way. Because as you can tell from our results, we remain really disciplined in our marketing spend so that our burdened LTV to CAC ratio remains efficient. In other words, we will not engage in unnatural acts to bend this curve. Ultimately, the way forward here, the way to move the needle on gross adds is through our investments in R&D, which will result in us introducing new products that are more accessible in our existing categories while launching new categories as well. I do wanna point out that in the meantime, while we wait for subscribers to turn, we have a lot of vectors for revenue growth that don't result in paid connected fitness subscriptions. You'll likely see inflections in growth in revenue before you see them in subscribers, and this past quarter was an example of that. Some of the vectors that are at play this quarter and will be in the future are selling additional equipment to our existing members. That doesn't generate more subscriptions, but it does generate revenue. The revenue from our Commercial Business Unit, which we talked about earlier, and that grew 14% year-over-year in the last quarter. That's predominantly equipment-based. It doesn't come with very many subscribers. The Spotify deal that we just announced is a revenue driver, but those aren't our subscribers, those are Spotify subscribers. The pricing changes, again, that was a real positive impact in Q3. No subscribers attached to that, but real high-margin revenue. Even the promotional levers that you saw us pull in Q3, which helped us beat on revenue, don't come with particularly more subscribers, or it's an indirect connection, but it does generate the revenue. So that's a little bit of what should help tide us all over while we wait for the ultimate growth in subscribers. Great. Next question. That's very, very helpful. Thank you. One moment for our next question. That will come from the line of Youssef Squali with Truist. Your line is open. Great. Thank you very much, good morning, guys. Nice to see you guys making real progress on some of these important KPIs. Maybe a couple questions. One, maybe talk a little bit about the promotional intensity you saw in Q3. I think you called that out as one of the drivers of gross margin. Try to reconcile basically your Q4 guide for connected fitness subscribers with your comments around churn being relatively flat. Maybe just give us some color as to what's going on outside of maybe the seasonally weak period that is this quarter we're going into. Is there anything else going on? Maybe you're pulling back on promotional intensity that you've done in Q3. Then just one last one. Peter, you talked a little bit about new hardware coming this fall. Maybe can you just provide some preview of what those may be? I think new modalities. Would strength be part of it? Would a cheaper tread be part of it? Just any kind of color you can provide, knowing that obviously, you know, you'll provide a lot more this fall, more details. Thank you. Thanks, Youssef. There's a lot in there. Let me do my best to try to cover all of it. As I said in my remarks, we use an LTV to CAC framework to drive our marketing and our promotional spend, right? We like that framework because it's inclusive of everything from how much money we spend on marketing to how aggressive we are on promotions. What we saw about a month or so into the quarter was that we had real marketing efficiency. We took that opportunity to do a couple of things. One, we had a promotion that was planned to expire sometime toward the end of February. We extended that promotion an extra week or so. We also saw an opportunity to take a little bit of a deeper price promotion on a variety of our pieces of equipment throughout the sort of back half of the quarter in order to take advantage of that. We were still able to land our LTV to CAC at 2x, which is in our long-term goal range for LTV to CAC. That's basically what happened in Q3 on that front. We don't have any plans to repeat that activity in Q4. Our guidance reflects the expectation that our growth, our gross additions will continue declining year-over-year, and that's just us remaining disciplined. Also being increasingly, I think, sophisticated about the best times to be promotional. We've done a lot of work, looked at our successes and our failures in the past, and we see that the periods where we acted in Q3 are some of the most productive ones. Q4, as you mentioned, seasonality on the churn side is also a seasonal period for equipment sales as well. Now turning to your question on gross adds and our guide. The seasonality we just talked about, you raised that as well. That is something well known in our business. I also talked about pulling back on promotional intensity and remaining disciplined on our marketing investment. All of that basically adds up to the Q4 that we're projecting. With regard to the question that you had about our new equipment, for competitive reasons and because it's an earnings call, not a big product reveal moment, I'm not gonna comment specifically on our unannounced hardware today. I'll just elaborate a bit and say that, one, bringing more price accessibility in our existing modalities is a top priority for us. We have the ability to do this in the bike category because we've been able to take advantage of the large reservoir of refurb inventory that we have available to us. We have not had a similar opportunity in our other categories. That's really driving our R&D in that area. With regard to new modalities, I wanna note that they do take a little longer because we're building from the ground up. As you mentioned, I will remind you that we're already a leader in the strength category. We have roughly 2 million of our members engaging with strength every quarter. We see an opportunity to broaden our equipment portfolio in that category. I wouldn't even view that as a singular opportunity. I think there are multiple opportunities for us to pursue that category, which we define as all forms of resistance training. I hope that tides you over. Yep, that answers it all. Thanks, Peter. One moment- I'll go to the next question. One moment for our next question. That will come from the line of Doug Anmuth with JPMorgan. Your line is open. Great. Thanks. It's Bryan Smilek on for Doug. I guess just two questions. You know, obviously good to see the acceleration on the Commercial Series and revenue overall. Could you just elaborate more on the demand pipeline and how the product and go-to-market strategy is changing, especially as you launch the new products in 2027? Then I guess more so on the marketing side, Peter, you talked about managing towards that two to three times average LTV to CAC. Can you talk about some channels where you're seeing some of this efficiency and spend that allowed you to, you know, get those deeper promos throughout the quarter? Thank you. Yeah. Thank you. I can start with the commercial and the business overview. Just to double-click on the Q3 performance, as Peter covered in his remarks, is where that CBU grew year-over-year 14% in Q3. As we look ahead in Q4, we expect CBU revenue growth to be a little softer in Q4 due to elevated CBU revenue in Q4 of last year as we experienced increased demand ahead of tariff surcharges, which were announced in Q4 of FY 2025. We just, you know, want you guys to have a context of that. When we think about the long-term growth potential for the commercial business, we see tremendous opportunity. We estimate that we roughly have around 3% of a growing $10 billion commercial fitness equipment segment market share. The commercial fitness market is expanding as we observe rising global health awareness. We're seeing growth in gym and corporate wellness centers, also an increased demand for digitally enabled fitness facilities. All of these things drive demand for our high-quality equipment. We believe we have multiple growth vectors, and a lot of them are gonna play in the long run, but some of them in the short term as well. First, growing the legacy Precor business, we can do that through sales enablement, channel partnership, investing in our strategy account. This is the core of our CBU business today. We see an opportunity in investing a commercial product roadmap. You just highlighted that this quarter we announced the Commercial Series, which will feature a bike and a tread built specifically for high traffic gym floors. This is a milestone that combines Peloton digital fitness leadership with Precor trusted industrial scale, and we have received great feedback, two of the leading industry events in this space and look forward to bringing these into the market in fiscal 2027. The third thing that I would like to highlight is the opportunity for international expansion, which is a big opportunity for CBU by leveraging Precor existing global presence to grow the Peloton brand. Currently, we believe CBU is underrepresented outside of the U.S., and we believe we have significant room to grow our market share internationally. Let me cover the second question that you asked, which was about the various channels that we have and their impact on our LTV to CAC. Let me focus on our first party versus our secondhand sales versus our third party sales. In 1P sales, we saw good efficiency on web. Of course, you know, a lot of that is driven by our email marketing. We have a team that is just absolutely a crack team at working the funnel and getting ever more efficient at customer acquisition with the leads that we generate. Within our first party retail, we continued to see really encouraging results from our micro stores. That is relative to our in-line stores, where I think our micro stores are actually now, despite being, give or take 1/10 the size of our in-line stores, they're significantly more productive than the in-line stores. It shows some of the things that we've learned about the about the positioning of those stores. That has given us the confidence to begin investing in the next round of micro stores that we'll have in line for our fiscal 2027. We also saw good customer acquisition from secondhand sales, which in the quarter generated more than half of our gross adds, and that is influenced by our marketing, right? What we've found in our path to purchase research is that when we market to members, then that begins a process for them of discovering all the ways that they can get access to Peloton equipment. Some of them choose to do so, for example, through Facebook Marketplace, or through our Repowered marketplace. That has turned out to be very productive for us. Relatively less productive in the quarter were our third-party retail and our fitness as a service rental business. Those, I would say, just to round out the answer to your question, were among the less productive channels. Great. Thank you, Peter. Appreciate it. One moment for our next question. That will come from the line of Brian Nagel with Oppenheimer. Your line is open. Hey, guys. Good morning. I appreciate you taking my questions. Peter, the question I'm asking, I guess a little bit bigger picture. You know, recognizing you haven't provided official guidance, you know, beyond this current fiscal year. In your-- the commentary, around, you know, the evolution of Peloton to more of a wellness company and some of these green shoots you're starting to see on that front, how long Again, what's the duration till we see some type of, you know, within the total company results, right? The a real inflection as a result of these efforts. I mean, is it I guess, is it an event that we could expect in the next fiscal year? Are we waiting longer than that? My follow-up question, you know, just to kinda tie this all together, you know, again, I appreciate all the comments with regards to balance sheet. You know, this forthcoming balance sheet rework, you know, how critical is that in order to drive, you know, this next leg of growth within Peloton? Thank you. Brian, thank you. I think the question you're asking is how long do we have to wait until we get back to sustained growth? There's a couple of ways of looking at that, right? One is subscriptions, the other is revenue. As I've shared earlier in the call, what we can expect is revenue to come ahead of subscriptions. We're not ready at this point to call when we get back to subscriptions growth. I was very pleased that we were able to deliver a Q3 with positive revenue growth. While we won't see that likely sustain in Q4 based on our implied guidance for the quarter, I think we're now in a stage where hopefully we'll see some steps forward and some steps back as we right the ship. The ways that we do that are not only by continuing to build on our leadership in cardio, but as we talked about on this call, starting to expand our impact into some areas like strength, where we know that there is substantial untapped opportunity, and we have a really ambitious R&D agenda. It's also in things like what we're doing in mental well-being, where we're generating now Peloton content for the Breathwrk app, and that will generate revenue, but app subscribers, not CF subscribers, which are the ones that we typically see investors tracking. We're also making progress in some other areas like nutrition and hydration, and we'll have more to share about that hopefully in the not too distant future. We also find, of course, that when members engage in multiple modalities, they stay with us longer, and that can positively move the trajectory on subscriptions as well as revenue. For example, the category of sleep is one where we're already a leader in sleep meditations. I made sure to take one last night before this morning's call, and I'd encourage everyone to do that. Those are some of the categories and the areas that will first get us back to revenue growth and then ultimately set the stage for the subscriptions turn. With regard to the balance sheet, we don't need to refinance in order to be able to drive the strategy that we described. We'd be foolish not to, because we are, from where we sit right now, paying more interest than we need to. That could generate additional funds for free cash flow or for investments. That refinancing would also give us the flexibility to engage in shareholder-friendly actions like buybacks that could help reduce the float and address the dilution that we know is on many of our investors' minds. All of those things are absolutely on the table, along with the fact that under the right circumstances, and it would require, you know, the right price and real discipline and rigor, because we've worked super hard to accumulate this money, so we're not gonna fritter it away. If the right investment or acquisition opportunities come to us, we'll take those really seriously. As one of the, if not the only, public company in our segment of the fitness market, we are a pretty common port of call for companies looking for an exit. If, if we find the right one at the right price, we would at least seriously consider that. Those are some of the things that we can do with our excess cash. First and foremost, it's with the goal of serving our shareholders. Great. Thanks, Brian. We have time for one last question. Operator? Thank you. That final question will come from the line of Shweta Khajuria with Wolfe Research. Your line is open. Thank you for taking my question. I guess, could you please talk to how you think about the evolution of the business? Certainly, you spoke to the trends that you're seeing in gross adds and retention, implying that net adds could be flat at some point and then turn positive. As your business evolves, how do you view the overall market opportunity across commercial business unit and partnerships like the one you just announced with Spotify versus hardware sales, whereby is net adds going to be a key metric for you if your revenue is coming from, you know, other diversified sources? How do you think about that? Thank you. Yeah. Thanks, Shweta. I'll cover that. I mean, we try to be pretty practical and hard-nosed when it comes to the business. Quality revenue ultimately is what matters. By quality revenue, I mean revenue with good margins and ultimately really efficient cash flow generation from that. We know that a substantial fraction of that quality revenue for us comes today from connected fitness subscriptions, that is also an important metric to us. It's in service of the revenue metric. It's not an end metric in and of itself. That being said, we are acutely focused on that one because we recognize its importance in our profit generation in particular. We're incredibly excited about our ability to diversify this business, leveraging the power of the Peloton and the Precor brands. The commercial business growth that we're experiencing is, one, because gym operators are so excited that Precor is back, right? We were such an important supplier to them for many years. I think we took our eye off the ball for a couple of years there. Gym operators, they're all telling us they can see it, that we're back, and that represents what we believe to be a sustainable source of high-quality revenue growth for many years into the future. Content licensing is another area that's attractive for us because it allows us to leverage the investment that we've already made in content, for our connected fitness subscribers and to generate additional high-margin revenue from that existing space. Going back to the commercial business, Peloton brand is woefully underexploited in that space. Gym operators tell us every time we speak with them that the only brand that their members ask for by name is Peloton. We've had people lining up to see our products when we've demonstrated at recent fitness conferences. Those hardware sales will come with some subscribers just to tie those things back, but not at the same ratio as a household, right? Where you sell 1 piece of equipment, you know, that's basically shared by a couple of 1 or 2 people in that household. In the case of a gym, many people share the same piece of equipment. That's a little bit about how all those things relate to each other. The evolution of the business is from connected fitness to connected wellness across all of the categories of cardio, both residential and commercial, strength, nutrition, mental wellbeing, sleep, recovery, realized through high-quality revenue with subscribers as a secondary metric that fuels that high-quality revenue. Thanks, Shweta. That was helpful. Thanks, Peter. Before we wrap, knowing that many of the people who participate in this call are also our members, I wanna point out a few items that you shouldn't miss. First, check out the 2-for-1 strength class that features Adrian Williams co-star and Tunde, so you too can build muscles like Hudson. I also want to encourage you to join our live spring cross-training plan. Those classes have been dropping Monday through Friday, and they're also available on demand. Finally, if you're training for a marathon, be sure to try out our new Pace Your Race marathon program that proudly features our cast of global Tread instructors. With that, thank you for joining today, and please join me in wishing James Marsh a happy birthday. Thank you. This concludes today's program. Thank you all for participating. You may now disconnect.

Speaker 5: Good Day, and welcome to Peloton's Q3 Fiscal Year 2026 Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. James Marsh, Head of Investor Relations. Please go ahead. Good Day, and welcome to Peloton's Q3 Fiscal Year 2026 Conference Call. good day and welcome to peloton's q3 fiscal year 2026 conference call At this time, all participants are in a listen only mode. at this time all participants are in a listen only mode After the speaker presentation, there will be a question- and- answer session. after the speaker presentation there will be a question- and- answer session To ask a question during the session, you will need to press * 11 on your telephone. to ask a question during the session you will need to press * 11 on your telephone You will then hear an automated message advising your hand is raised. you will then hear an automated message advising your hand is raised To withdraw your question, press * 11 again. to withdraw your question press * 11 again Please be advised that today's conference is being recorded. please be advised that today's conference is being recorded I would now like to hand the conference over to your speaker, Mr. James Marsh, Head of Investor Relations. i would now like to hand the conference over to your speaker mr james marsh head of investor relations Please go ahead. please go ahead

Speaker 4: Thank you, operator. Good morning, and welcome to Peloton's Q3 Fiscal Year 2026 Conference Call. Joining today's call are Peloton Chief Executive Officer and President, Peter Stern, Interim Chief Financial Officer, Saqib Baig, and Vice President of Financial Planning and Analysis, Scott Burch. Our comments and responses to your questions reflect management's views as of today only and will include forward-looking statements related to our business under federal securities law. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business. Thank you, operator. thank you operator Good morning, and welcome to Peloton's Q3 Fiscal Year 2026 Conference Call. good morning and welcome to peloton's q3 fiscal year 2026 conference call Joining today's call are Peloton Chief Executive Officer and President, Peter Stern, Interim Chief Financial Officer, Saqib Baig, and Vice President of Financial Planning and Analysis, Scott Burch. joining today's call are peloton chief executive officer and president peter stern interim chief financial officer saqib baig and vice president of financial planning and analysis scott burch Our comments and responses to your questions reflect management's views as of today only and will include forward-looking statements related to our business under federal securities law. our comments and responses to your questions reflect management's views as of today only and will include forward-looking statements related to our business under federal securities law Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business. actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business Please refer to our SEC filings, today's press release, and our earnings presentation, all of which can be found on our investor relations website, for a discussion of our material risks and other important factors that could impact our results. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures and definitions for our user metrics are also provided in today's press release. I'll turn it over to Peter. Please refer to our SEC filings, today's press release, and our earnings presentation, all of which can be found on our investor relations website, for a discussion of our material risks and other important factors that could impact our results. please refer to our sec filings today's press release and our earnings presentation all of which can be found on our investor relations website for a discussion of our material risks and other important factors that could impact our results During this call, we will discuss both GAAP and non-GAAP financial measures. during this call we will discuss both gaap and non-gaap financial measures A reconciliation of GAAP to non-GAAP financial measures and definitions for our user metrics are also provided in today's press release. a reconciliation of gaap to non-gaap financial measures and definitions for our user metrics are also provided in today's press release I'll turn it over to Peter. i'll turn it over to peter

Speaker 6: Thanks, James, and good morning, everyone. Our Q3 results are proof that the strategy of evolving Peloton from a connected fitness company to a connected wellness company is delivering results. This strategy is in direct response to consumers not only wanting to add years to their life, but also life to their years. Peloton's content, equipment, and beloved brand position us to capture more market share within the growing $7 trillion global wellness economy and to achieve ever greater human impact. As I've shared in prior calls, there are four pillars to delivering on our strategy. One, improve member outcomes. Two, meet members everywhere. Three, make members for life. Four, business excellence. Let's start with our progress on improving member outcomes, which is how we empower them to live fit, strong, long, and happy. Thanks, James, and good morning, everyone. thanks james and good morning everyone Our Q3 results are proof that the strategy of evolving Peloton from a connected fitness company to a connected wellness company is delivering results. our q3 results are proof that the strategy of evolving peloton from a connected fitness company to a connected wellness company is delivering results This strategy is in direct response to consumers not only wanting to add years to their life, but also life to their years. this strategy is in direct response to consumers not only wanting to add years to their life but also life to their years Peloton's content, equipment, and beloved brand position us to capture more market share within the growing $7 trillion global wellness economy and to achieve ever greater human impact. peloton's content equipment and beloved brand position us to capture more market share within the growing $7 trillion global wellness economy and to achieve ever greater human impact As I've shared in prior calls, there are four pillars to delivering on our strategy. as i've shared in prior calls there are four pillars to delivering on our strategy One, improve member outcomes. one improve member outcomes Two, meet members everywhere. two meet members everywhere Three, make members for life. three make members for life Four, business excellence. four business excellence Let's start with our progress on improving member outcomes, which is how we empower them to live fit, strong, long, and happy. let's start with our progress on improving member outcomes which is how we empower them to live fit strong long and happy During the quarter, over 400,000 people took our highlight classes with Rebecca Kennedy. This contributed to 48% growth in our Pilates modality, which is becoming a central plank of our strength program and an area where we are investing both in R&D and instructors, as exemplified by the three we onboarded last quarter. Speaking of R&D, our work on producing new equipment in one of our existing modalities is progressing well, and I look forward to introducing some exciting new hardware and features to you this fall. In the space of mental well-being, last week, we launched 140 Peloton instructor-led meditation and sleep classes in the Breathwrk app, as well as daily meditations and Breathwrk programming that will begin to develop that app into a preeminent platform to help people relieve stress, sleep, and achieve better focus. During the quarter, over 400,000 people took our highlight classes with Rebecca Kennedy. during the quarter over 400,000 people took our highlight classes with rebecca kennedy This contributed to 48% growth in our Pilates modality, which is becoming a central plank of our strength program and an area where we are investing both in R&D and instructors, as exemplified by the three we onboarded last quarter. this contributed to 48% growth in our pilates modality which is becoming a central plank of our strength program and an area where we are investing both in r&d and instructors as exemplified by the three we onboarded last quarter Speaking of R&D, our work on producing new equipment in one of our existing modalities is progressing well, and I look forward to introducing some exciting new hardware and features to you this fall. speaking of r&d our work on producing new equipment in one of our existing modalities is progressing well and i look forward to introducing some exciting new hardware and features to you this fall In the space of mental well-being, last week, we launched 140 Peloton instructor-led meditation and sleep classes in the Breathwrk app, as well as daily meditations and Breathwrk programming that will begin to develop that app into a preeminent platform to help people relieve stress, sleep, and achieve better focus. in the space of mental well-being last week we launched 140 peloton instructor-led meditation and sleep classes in the breathwrk app as well as daily meditations and breathwrk programming that will begin to develop that app into a preeminent platform to help people relieve stress sleep and achieve better focus To further our progress in improving member outcomes, I'm delighted to celebrate the arrival of Sarah Robb O'Hagan, our Chief Content and Member Development Officer. Sarah brings a wealth of experience serving in executive and board of director roles for various well-known brands in the fitness space, including EXOS, Strava, Equinox, Gatorade, and Nike. Sarah is focused on accelerating innovation across our content ecosystem, driving engagement, and in so doing, deepening loyalty across our community by evolving the member experience. To further our progress in improving member outcomes, I'm delighted to celebrate the arrival of Sarah Robb O'Hagan, our Chief Content and Member Development Officer. to further our progress in improving member outcomes i'm delighted to celebrate the arrival of sarah robb o'hagan our chief content and member development officer Sarah brings a wealth of experience serving in executive and board of director roles for various well-known brands in the fitness space, including EXOS, Strava, Equinox, Gatorade, and Nike. sarah brings a wealth of experience serving in executive and board of director roles for various well-known brands in the fitness space including exos strava equinox gatorade and nike Sarah is focused on accelerating innovation across our content ecosystem, driving engagement, and in so doing, deepening loyalty across our community by evolving the member experience. sarah is focused on accelerating innovation across our content ecosystem driving engagement and in so doing deepening loyalty across our community by evolving the member experience Second, let's talk about our strategy for meeting members everywhere. This part of our strategy is how we grow our Peloton community. Last week, we announced big news in this area, our content licensing partnership with Spotify. This partnership brings more than 1,400 Peloton classes across strength, Pilates, barre, yoga, meditation, outdoor, and cardio to hundreds of millions of Spotify Premium subscribers globally, exponentially growing our reach. Second, let's talk about our strategy for meeting members everywhere. second let's talk about our strategy for meeting members everywhere This part of our strategy is how we grow our Peloton community. this part of our strategy is how we grow our peloton community Last week, we announced big news in this area, our content licensing partnership with Spotify. last week we announced big news in this area our content licensing partnership with spotify This partnership brings more than 1,400 Peloton classes across strength, Pilates, barre, yoga, meditation, outdoor, and cardio to hundreds of millions of Spotify Premium subscribers globally, exponentially growing our reach. this partnership brings more than 1,400 peloton classes across strength pilates barre yoga meditation outdoor and cardio to hundreds of millions of spotify premium subscribers globally exponentially growing our reach Our work with Spotify provides a powerful entry point into the magic of Peloton, allowing us to efficiently grow our brand through a platform that people everywhere already know and love, while also providing a high-margin, diversified revenue stream. We expect to bring hundreds more classes to Spotify Premium subscribers each month. Our commercial business unit is another way we can meet members everywhere by reaching people in tens of thousands of gyms across more than 60 countries. In Q3, we delivered another quarter of standout growth in this unit, as revenue increased 14% year-over-year. To build on this momentum, we recently announced the Peloton Commercial Series, which includes a new bike and treadmill specifically designed for heavy traffic gym environments. Our work with Spotify provides a powerful entry point into the magic of Peloton, allowing us to efficiently grow our brand through a platform that people everywhere already know and love, while also providing a high-margin, diversified revenue stream. our work with spotify provides a powerful entry point into the magic of peloton allowing us to efficiently grow our brand through a platform that people everywhere already know and love while also providing a high-margin diversified revenue stream We expect to bring hundreds more classes to Spotify Premium subscribers each month. we expect to bring hundreds more classes to spotify premium subscribers each month Our commercial business unit is another way we can meet members everywhere by reaching people in tens of thousands of gyms across more than 60 countries. our commercial business unit is another way we can meet members everywhere by reaching people in tens of thousands of gyms across more than 60 countries In Q3, we delivered another quarter of standout growth in this unit, as revenue increased 14% year-over-year. in q3 we delivered another quarter of standout growth in this unit as revenue increased 14% year-over-year To build on this momentum, we recently announced the Peloton Commercial Series, which includes a new bike and treadmill specifically designed for heavy traffic gym environments. to build on this momentum we recently announced the peloton commercial series which includes a new bike and treadmill specifically designed for heavy traffic gym environments This equipment, which brings together Precor's industrial-grade durability with Peloton's unsurpassed connected experience, will become available to gym operators in Q2 of fiscal 2027 and will help us continue to grow Peloton's international footprint and gym presence. We see tremendous upside in this category as we estimate that we have only a 3% share of the more than $10 billion and growing global commercial fitness equipment market segment. I'd be remiss if I didn't mention our recent ad campaign featuring Adrian Williams. This campaign went viral because it's a glorious demonstration of the joy of movement that drives everything we do at Peloton. This equipment, which brings together Precor's industrial-grade durability with Peloton's unsurpassed connected experience, will become available to gym operators in Q2 of fiscal 2027 and will help us continue to grow Peloton's international footprint and gym presence. this equipment which brings together precor's industrial-grade durability with peloton's unsurpassed connected experience will become available to gym operators in q2 of fiscal 2027 and will help us continue to grow peloton's international footprint and gym presence We see tremendous upside in this category as we estimate that we have only a 3% share of the more than $10 billion and growing global commercial fitness equipment market segment. we see tremendous upside in this category as we estimate that we have only a 3% share of the more than $10 billion and growing global commercial fitness equipment market segment I'd be remiss if I didn't mention our recent ad campaign featuring Adrian Williams. i'd be remiss if i didn't mention our recent ad campaign featuring adrian williams This campaign went viral because it's a glorious demonstration of the joy of movement that drives everything we do at Peloton. this campaign went viral because it's a glorious demonstration of the joy of movement that drives everything we do at peloton I want to congratulate Peloton's marketing team, led by Megan Imbres, which have delivered more than 60 million organic social views and significant global earned media buzz, helping us put Peloton back in the center of the zeitgeist where we belong. I want to congratulate Peloton's marketing team, led by Megan Imbres, which have delivered more than 60 million organic social views and significant global earned media buzz, helping us put Peloton back in the center of the zeitgeist where we belong. i want to congratulate peloton's marketing team led by megan imbres which have delivered more than 60 million organic social views and significant global earned media buzz helping us put peloton back in the center of the zeitgeist where we belong Third, let's talk about our strategy of Members for Life. This is where we work to keep the members we have. Initiatives such as Club Peloton, personalized plans from Peloton IQ, and some reactivation offers we implemented in Q3 helped us deliver net churn that was 7 basis points lower year-over-year in Q3, despite the price change we implemented in Q2. These results demonstrate the substantial value we provide to our members. Last, but certainly not least, is our strategy of Business Excellence. I believe the numbers here speak for themselves as we achieved an important milestone of positive year-over-year revenue growth in Q3, along with growth in gross margin, adjusted EBITDA, and free cash flow. Free cash flow increased $56 million, or 59% year-over-year. Third, let's talk about our strategy of Members for Life. third let's talk about our strategy of members for life This is where we work to keep the members we have. this is where we work to keep the members we have Initiatives such as Club Peloton, personalized plans from Peloton IQ, and some reactivation offers we implemented in Q3 helped us deliver net churn that was 7 basis points lower year-over-year in Q3, despite the price change we implemented in Q2. initiatives such as club peloton personalized plans from peloton iq and some reactivation offers we implemented in q3 helped us deliver net churn that was 7 basis points lower year-over-year in q3 despite the price change we implemented in q2 These results demonstrate the substantial value we provide to our members. these results demonstrate the substantial value we provide to our members Last, but certainly not least, is our strategy of Business Excellence. last but certainly not least is our strategy of business excellence I believe the numbers here speak for themselves as we achieved an important milestone of positive year-over-year revenue growth in Q3, along with growth in gross margin, adjusted EBITDA, and free cash flow. i believe the numbers here speak for themselves as we achieved an important milestone of positive year-over-year revenue growth in q3 along with growth in gross margin adjusted ebitda and free cash flow Free cash flow increased $56 million, or 59% year-over-year. free cash flow increased $56 million or 59% year-over-year While our Q4 expectations reflect that our path to sustained year-over-year revenue growth will not be linear, the underlying vectors of growth have never been clearer. As our business model evolves, we expect investors will see our growth materialize in total revenue first, driven in part by revenue streams like the commercial business unit and content licensing. I'm also pleased to share that we expect Peloton to achieve positive net income on a full year basis in fiscal 2026, in addition to our previously stated goal of positive operating income. This would be the first time in the company's history that we have achieved either of these metrics for a full year, let alone both. We have right-sized our cost structure, in particular G&A, and are now delivering in excess of $1 million of annualized revenue per employee. While our Q4 expectations reflect that our path to sustained year-over-year revenue growth will not be linear, the underlying vectors of growth have never been clearer. while our q4 expectations reflect that our path to sustained year-over-year revenue growth will not be linear the underlying vectors of growth have never been clearer As our business model evolves, we expect investors will see our growth materialize in total revenue first, driven in part by revenue streams like the commercial business unit and content licensing. as our business model evolves we expect investors will see our growth materialize in total revenue first driven in part by revenue streams like the commercial business unit and content licensing I'm also pleased to share that we expect Peloton to achieve positive net income on a full year basis in fiscal 2026, in addition to our previously stated goal of positive operating income. i'm also pleased to share that we expect peloton to achieve positive net income on a full year basis in fiscal 2026 in addition to our previously stated goal of positive operating income This would be the first time in the company's history that we have achieved either of these metrics for a full year, let alone both. this would be the first time in the company's history that we have achieved either of these metrics for a full year let alone both We have right-sized our cost structure, in particular G&A, and are now delivering in excess of $1 million of annualized revenue per employee. we have right-sized our cost structure in particular g&a and are now delivering in excess of $1 million of annualized revenue per employee We are well-positioned to continue delivering innovations in cardio, strength, commercial, mental wellbeing, content licensing, and beyond within a disciplined envelope for R&D spend. Strong financials and consistent cash flow have resulted in a vastly improved balance sheet. We ended Q3 with a 70% reduction year-over-year in our net debt. Add all this up, from a financial standpoint, we are no longer operating defensively. Instead, we are operating from a position of profound strategic optionality. We are well-positioned to continue delivering innovations in cardio, strength, commercial, mental wellbeing, content licensing, and beyond within a disciplined envelope for R&D spend. we are well-positioned to continue delivering innovations in cardio strength commercial mental wellbeing content licensing and beyond within a disciplined envelope for r&d spend Strong financials and consistent cash flow have resulted in a vastly improved balance sheet. strong financials and consistent cash flow have resulted in a vastly improved balance sheet We ended Q3 with a 70% reduction year-over-year in our net debt. we ended q3 with a 70% reduction year-over-year in our net debt Add all this up, from a financial standpoint, we are no longer operating defensively. add all this up from a financial standpoint we are no longer operating defensively Instead, we are operating from a position of profound strategic optionality. instead we are operating from a position of profound strategic optionality This enables us to move to a new stage of financial maturity characterized by strategic capital allocation. In anticipation of the expiration of the prepayment penalty on our term loan at the end of this month, we're evaluating every avenue to maximize shareholder value, including debt optimization, capital returns, and accretive strategic investments. With meaningful excess cash on the balance sheet, we have the luxury of patience. This enables us to move to a new stage of financial maturity characterized by strategic capital allocation. this enables us to move to a new stage of financial maturity characterized by strategic capital allocation In anticipation of the expiration of the prepayment penalty on our term loan at the end of this month, we're evaluating every avenue to maximize shareholder value, including debt optimization, capital returns, and accretive strategic investments. in anticipation of the expiration of the prepayment penalty on our term loan at the end of this month we're evaluating every avenue to maximize shareholder value including debt optimization capital returns and accretive strategic investments With meaningful excess cash on the balance sheet, we have the luxury of patience. with meaningful excess cash on the balance sheet we have the luxury of patience We are actively finalizing our holistic capital allocation strategy, evaluating alternatives including share repurchases, debt optimization, and potentially highly targeted investments. Finalizing and executing on this plan will be a key agenda item for our permanent CFO once they are seated. Speaking of a permanent CFO, our search is progressing well. We have met numerous qualified candidates, and we are gratified by the strong interest they have shown in Peloton. As I wrap up these remarks, I want to reiterate my confidence in Peloton's future. We continue to make great progress on deepening our relationships with our members, growing our opportunities to reach new members globally, diversifying our revenue streams, and planting new seeds for future growth, all while continuing to strengthen our financial foundation. We are actively finalizing our holistic capital allocation strategy, evaluating alternatives including share repurchases, debt optimization, and potentially highly targeted investments. we are actively finalizing our holistic capital allocation strategy evaluating alternatives including share repurchases debt optimization and potentially highly targeted investments Finalizing and executing on this plan will be a key agenda item for our permanent CFO once they are seated. finalizing and executing on this plan will be a key agenda item for our permanent cfo once they are seated Speaking of a permanent CFO, our search is progressing well. speaking of a permanent cfo our search is progressing well We have met numerous qualified candidates, and we are gratified by the strong interest they have shown in Peloton. we have met numerous qualified candidates and we are gratified by the strong interest they have shown in peloton As I wrap up these remarks, I want to reiterate my confidence in Peloton's future. as i wrap up these remarks i want to reiterate my confidence in peloton's future We continue to make great progress on deepening our relationships with our members, growing our opportunities to reach new members globally, diversifying our revenue streams, and planting new seeds for future growth, all while continuing to strengthen our financial foundation. we continue to make great progress on deepening our relationships with our members growing our opportunities to reach new members globally diversifying our revenue streams and planting new seeds for future growth all while continuing to strengthen our financial foundation With that, I will now pass it over to Saqib, who I'm very grateful to for serving so ably as Interim Chief Financial Officer and who will share more details on our financial results. With that, I will now pass it over to Saqib, who I'm very grateful to for serving so ably as Interim Chief Financial Officer and who will share more details on our financial results. with that i will now pass it over to saqib who i'm very grateful to for serving so ably as interim chief financial officer and who will share more details on our financial results

Speaker 7: Thanks, Peter. In Q3, we achieved total revenue of $631 million. This exceeded our guidance by $6 million and represents positive year-over-year growth. Our performance relative to guidance was driven by higher connected fitness equipment sales across Peloton and Precor brands. We ended Q3 with 2.662 million ending paid connected fitness subscriptions, in line with the midpoint of our guidance range. Q3 average net monthly paid connected fitness subscription churn was 1.2% and improved 7 basis points year-over-year. Moving to gross profit and gross margin. As a reminder, in Q1 of fiscal 2026, we began assigning executive compensation and other corporate overhead expenses associated with corporate facilities across the P&L as we focus on driving more accountability from cost at a functional level. Thanks, Peter. thanks peter In Q3, we achieved total revenue of $631 million. in q3 we achieved total revenue of $631 million This exceeded our guidance by $6 million and represents positive year-over-year growth. this exceeded our guidance by $6 million and represents positive year-over-year growth Our performance relative to guidance was driven by higher connected fitness equipment sales across Peloton and Precor brands. our performance relative to guidance was driven by higher connected fitness equipment sales across peloton and precor brands We ended Q3 with 2.662 million ending paid connected fitness subscriptions, in line with the midpoint of our guidance range. we ended q3 with 2.662 million ending paid connected fitness subscriptions in line with the midpoint of our guidance range Q3 average net monthly paid connected fitness subscription churn was 1.2% and improved 7 basis points year-over-year. q3 average net monthly paid connected fitness subscription churn was 1.2% and improved 7 basis points year-over-year Moving to gross profit and gross margin. moving to gross profit and gross margin As a reminder, in Q1 of fiscal 2026, we began assigning executive compensation and other corporate overhead expenses associated with corporate facilities across the P&L as we focus on driving more accountability from cost at a functional level. as a reminder in q1 of fiscal 2026 we began assigning executive compensation and other corporate overhead expenses associated with corporate facilities across the p&l as we focus on driving more accountability from cost at a functional level Prior to fiscal 2026, these costs were all recorded to G&A, but are now assigned to COGS, sales and marketing, G&A, and R&D. All of the year-over-year changes discussed today reference last year on an as-reported basis. Total gross profit was $327 million in Q3, an increase of $9 million or 3% year-over-year. Total gross margin was 51.9% in Q3, an increase of 90 basis points year-over-year and 210 basis points below our guidance of roughly 54%. Lower total gross margin relative to guidance was driven by opportunistic promotions across our connected fitness equipment sales. We operate within strict LTV to CAC hurdle rates, and as we saw a 2x LTV to CAC ratio, we seized an opportunity to get more aggressive. Please refer to our investor presentation for the segment-level breakdowns for revenue and gross margin. Prior to fiscal 2026, these costs were all recorded to G&A, but are now assigned to COGS, sales and marketing, G&A, and R&D. prior to fiscal 2026 these costs were all recorded to g&a but are now assigned to cogs sales and marketing g&a and r&d All of the year-over-year changes discussed today reference last year on an as-reported basis. all of the year-over-year changes discussed today reference last year on an as-reported basis Total gross profit was $327 million in Q3, an increase of $9 million or 3% year-over-year. total gross profit was $327 million in q3 an increase of $9 million or 3% year-over-year Total gross margin was 51.9% in Q3, an increase of 90 basis points year-over-year and 210 basis points below our guidance of roughly 54%. total gross margin was 51.9% in q3 an increase of 90 basis points year-over-year and 210 basis points below our guidance of roughly 54% Lower total gross margin relative to guidance was driven by opportunistic promotions across our connected fitness equipment sales. lower total gross margin relative to guidance was driven by opportunistic promotions across our connected fitness equipment sales We operate within strict LTV to CAC hurdle rates, and as we saw a 2x LTV to CAC ratio, we seized an opportunity to get more aggressive. we operate within strict ltv to cac hurdle rates and as we saw a 2x ltv to cac ratio we seized an opportunity to get more aggressive Please refer to our investor presentation for the segment-level breakdowns for revenue and gross margin. please refer to our investor presentation for the segment-level breakdowns for revenue and gross margin Total operating expenses, excluding restructuring, impairment, and supply settlement expenses, were $267 million in Q3, a decrease of $50 million or 16% year-over-year, reflecting the continued progress we have made in rightsizing our cost structure. We remain on track to achieve at least $100 million of run rate cost savings by the end of fiscal 2026. We also continue to deliver strong profitability with $126 million of adjusted EBITDA, an increase of $37 million or 41% year-over-year, and close to the midpoint of our guidance range. Q3 free cash flow of $151 million represented an increase of $56 million or 59% year-over-year. Turning to our balance sheet. We ended the quarter with a strong cash position of $1.13 billion, a decrease of $53 million quarter-over-quarter. Total operating expenses, excluding restructuring, impairment, and supply settlement expenses, were $267 million in Q3, a decrease of $50 million or 16% year-over-year, reflecting the continued progress we have made in rightsizing our cost structure. total operating expenses excluding restructuring impairment and supply settlement expenses were $267 million in q3 a decrease of $50 million or 16% year-over-year reflecting the continued progress we have made in rightsizing our cost structure We remain on track to achieve at least $100 million of run rate cost savings by the end of fiscal 2026. we remain on track to achieve at least $100 million of run rate cost savings by the end of fiscal 2026 We also continue to deliver strong profitability with $126 million of adjusted EBITDA, an increase of $37 million or 41% year-over-year, and close to the midpoint of our guidance range. we also continue to deliver strong profitability with $126 million of adjusted ebitda an increase of $37 million or 41% year-over-year and close to the midpoint of our guidance range Q3 free cash flow of $151 million represented an increase of $56 million or 59% year-over-year. q3 free cash flow of $151 million represented an increase of $56 million or 59% year-over-year Turning to our balance sheet. turning to our balance sheet We ended the quarter with a strong cash position of $1.13 billion, a decrease of $53 million quarter-over-quarter. we ended the quarter with a strong cash position of $1.13 billion a decrease of $53 million quarter-over-quarter This decrease was driven by paying down roughly $200 million of convertible debt when it reached maturity in February, partially offset by strong cash flow generation in the quarter. The significant progress we have made in profitability is reflected in our net debt of $173 million, which decreased $412 million or 70% year-over-year. Similarly, our gross and net leverage ratios have improved meaningfully to 2.9 and 0.4 respectively. As Peter mentioned, we are focused on strategic capital deployment. A key element of this is managing dilution through a disciplined approach to equity compensation. Our stock-based compensation expense decreased $15 million or 22% year-over-year in Q3. Next, I would like to take time to provide context for the financial outlook for the remainder of the fiscal year. This decrease was driven by paying down roughly $200 million of convertible debt when it reached maturity in February, partially offset by strong cash flow generation in the quarter. this decrease was driven by paying down roughly $200 million of convertible debt when it reached maturity in february partially offset by strong cash flow generation in the quarter The significant progress we have made in profitability is reflected in our net debt of $173 million, which decreased $412 million or 70% year-over-year. the significant progress we have made in profitability is reflected in our net debt of $173 million which decreased $412 million or 70% year-over-year Similarly, our gross and net leverage ratios have improved meaningfully to 2.9 and 0.4 respectively. similarly our gross and net leverage ratios have improved meaningfully to 2.9 and 0.4 respectively As Peter mentioned, we are focused on strategic capital deployment. as peter mentioned we are focused on strategic capital deployment A key element of this is managing dilution through a disciplined approach to equity compensation. a key element of this is managing dilution through a disciplined approach to equity compensation Our stock-based compensation expense decreased $15 million or 22% year-over-year in Q3. our stock-based compensation expense decreased $15 million or 22% year-over-year in q3 Next, I would like to take time to provide context for the financial outlook for the remainder of the fiscal year. next i would like to take time to provide context for the financial outlook for the remainder of the fiscal year Our full year fiscal 2026 total revenue outlook of $2.42 billion-$2.44 billion reflects an increase of $10 million at the midpoint compared to prior guidance and 2% revenue decrease year-over-year at the midpoint. The increase related to prior guidance is primarily driven by higher equipment sales observed in Q3. It is worth noting the anticipated content licensing revenue associated with Spotify partnership we announced last week was already reflected in our prior revenue guidance and will be recorded to the subscription segment. Our full year fiscal 2026 guidance for total gross margin is roughly 52.5%. Which reflects a decrease of roughly 50 basis points relative to prior guidance and an improvement of 160 basis points year-over-year. Our full year fiscal 2026 total revenue outlook of $2.42 billion-$2.44 billion reflects an increase of $10 million at the midpoint compared to prior guidance and 2% revenue decrease year-over-year at the midpoint. our full year fiscal 2026 total revenue outlook of $2.42 billion-$2.44 billion reflects an increase of $10 million at the midpoint compared to prior guidance and 2% revenue decrease year-over-year at the midpoint The increase related to prior guidance is primarily driven by higher equipment sales observed in Q3. the increase related to prior guidance is primarily driven by higher equipment sales observed in q3 It is worth noting the anticipated content licensing revenue associated with Spotify partnership we announced last week was already reflected in our prior revenue guidance and will be recorded to the subscription segment. it is worth noting the anticipated content licensing revenue associated with spotify partnership we announced last week was already reflected in our prior revenue guidance and will be recorded to the subscription segment Our full year fiscal 2026 guidance for total gross margin is roughly 52.5%. our full year fiscal 2026 guidance for total gross margin is roughly 52.5% Which reflects a decrease of roughly 50 basis points relative to prior guidance and an improvement of 160 basis points year-over-year. which reflects a decrease of roughly 50 basis points relative to prior guidance and an improvement of 160 basis points year-over-year Our full year fiscal 2026 guidance range for adjusted EBITDA of $470 million-$480 million is in line with prior guidance and an 18% year-over-year increase at the midpoint. Our Q4 guidance range for ending paid connected fitness subscriptions is 2.55 million-2.57 million. Our guidance reflects an expectation that our average net monthly paid connected fitness subscription churn rate will be roughly flat year-over-year in full year fiscal 2026, despite the price change we implemented in Q2. Gross additions are expected to decrease year-over-year as a result of lower equipment sales. Generating meaningful free cash flow remains a top priority for us. We expect full year fiscal 2026 free cash flow to be in the vicinity of $350 million. Our full year fiscal 2026 guidance range for adjusted EBITDA of $470 million-$480 million is in line with prior guidance and an 18% year-over-year increase at the midpoint. our full year fiscal 2026 guidance range for adjusted ebitda of $470 million-$480 million is in line with prior guidance and an 18% year-over-year increase at the midpoint Our Q4 guidance range for ending paid connected fitness subscriptions is 2.55 million-2.57 million. our q4 guidance range for ending paid connected fitness subscriptions is 2.55 million-2.57 million Our guidance reflects an expectation that our average net monthly paid connected fitness subscription churn rate will be roughly flat year-over-year in full year fiscal 2026, despite the price change we implemented in Q2. our guidance reflects an expectation that our average net monthly paid connected fitness subscription churn rate will be roughly flat year-over-year in full year fiscal 2026 despite the price change we implemented in q2 Gross additions are expected to decrease year-over-year as a result of lower equipment sales. gross additions are expected to decrease year-over-year as a result of lower equipment sales Generating meaningful free cash flow remains a top priority for us. generating meaningful free cash flow remains a top priority for us We expect full year fiscal 2026 free cash flow to be in the vicinity of $350 million. we expect full year fiscal 2026 free cash flow to be in the vicinity of $350 million I will now hand the call back to the operator for Q&A. I will now hand the call back to the operator for Q&A. i will now hand the call back to the operator for q&a

Speaker 4: Before I turn the call over to the operator, let me ask a couple questions from our Retail Investors. Our first question comes from the leaderboard named Vic83. His question is: Can you clear up some of the confusion around Section 232 tariffs? Are your products exempt? What is the new view on tariff impact for the year? Do we expect a refund on previously paid IEEPA tariffs? Peter. Before I turn the call over to the operator, let me ask a couple questions from our Retail Investors. before i turn the call over to the operator let me ask a couple questions from our retail investors Our first question comes from the leaderboard named Vic 83. our first question comes from the leaderboard named vic 83 His question is: Can you clear up some of the confusion around Section 232 tariffs? his question is can you clear up some of the confusion around section 232 tariffs Are your products exempt? are your products exempt What is the new view on tariff impact for the year? what is the new view on tariff impact for the year Do we expect a refund on previously paid IEEPA tariffs? do we expect a refund on previously paid ieepa tariffs Peter. peter

Speaker 6: Thanks, Vic, for the question. Tariffs are, as you know, a moving target. We follow it closely. First, the equipment we manufacture here in the U.S. is obviously not subject to tariffs at all. For everything else, based on the tariff policies that are currently in place, imported Peloton and Precor hardware are no longer subject to the Section 232 tariffs on aluminum and steel content. They do remain subject to all other applicable tariffs, which include the MFN tariff as well as Sections 122 and 301. Regarding IEEPA, we're closely monitoring the updates from U.S. Customs and Border Protection on when we'll be able to submit our refund request. Our request is somewhat more complicated than the initial round of requests. We will submit that as soon as the CBP is ready to receive it. Thanks, Vic, for the question. thanks vic for the question Tariffs are, as you know, a moving target. tariffs are as you know a moving target We follow it closely. we follow it closely First, the equipment we manufacture here in the U.S. is obviously not subject to tariffs at all. first the equipment we manufacture here in the u.s is obviously not subject to tariffs at all For everything else, based on the tariff policies that are currently in place, imported Peloton and Precor hardware are no longer subject to the Section 232 tariffs on aluminum and steel content. for everything else based on the tariff policies that are currently in place imported peloton and precor hardware are no longer subject to the section 232 tariffs on aluminum and steel content They do remain subject to all other applicable tariffs, which include the MFN tariff as well as Sections 122 and 301. they do remain subject to all other applicable tariffs which include the mfn tariff as well as sections 122 and 301 Regarding IEEPA, we're closely monitoring the updates from U.S. regarding ieepa we're closely monitoring the updates from u.s Customs and Border Protection on when we'll be able to submit our refund request. customs and border protection on when we'll be able to submit our refund request Our request is somewhat more complicated than the initial round of requests. our request is somewhat more complicated than the initial round of requests We will submit that as soon as the CBP is ready to receive it. we will submit that as soon as the cbp is ready to receive it The changes that I just described, along with various inventory ins and outs, drive a net benefit to our tariff exposure. We expect tariffs to represent roughly $30 million of free cash flow exposure for our full year 2026, which is a reduction of $15 million relative to the $45 million that we shared last quarter. The changes that I just described, along with various inventory ins and outs, drive a net benefit to our tariff exposure. the changes that i just described along with various inventory ins and outs drive a net benefit to our tariff exposure We expect tariffs to represent roughly $30 million of free cash flow exposure for our full year 2026, which is a reduction of $15 million relative to the $45 million that we shared last quarter. we expect tariffs to represent roughly $30 million of free cash flow exposure for our full year 2026 which is a reduction of $15 million relative to the $45 million that we shared last quarter

Speaker 4: Thanks, Peter. Our second question comes from leaderboard named John H. Schreiber. Please provide an update on the company's capital allocation plan now that the balance sheet has been significantly improved, thanks to several quarters of positive free cash flow. Can shareholders expect a share repurchase plan to be announced soon? Peter. Thanks, Peter. thanks peter Our second question comes from leaderboard named John H. our second question comes from leaderboard named john h Schreiber. schreiber Please provide an update on the company's capital allocation plan now that the balance sheet has been significantly improved, thanks to several quarters of positive free cash flow. please provide an update on the company's capital allocation plan now that the balance sheet has been significantly improved thanks to several quarters of positive free cash flow Can shareholders expect a share repurchase plan to be announced soon? can shareholders expect a share repurchase plan to be announced soon Peter. peter

Speaker 6: Thanks for this, John. It's amazing what a difference two years have made in the strength of our balance sheet. It's my great pleasure to address your question from where we sit today. As you may know, our $1 billion term loan has a $10 million prepayment penalty that expires at the end of this month. We haven't wanted to touch that until then. At the same time, we're accumulating cash on our balance sheet, thanks to our disciplined operating approach. At the end of the quarter, you heard Saqib say that we had about $1.13 billion in cash. That's after paying down the $200 million of convertible notes that came due during the quarter. Thanks for this, John. thanks for this john It's amazing what a difference two years have made in the strength of our balance sheet. it's amazing what a difference two years have made in the strength of our balance sheet It's my great pleasure to address your question from where we sit today. it's my great pleasure to address your question from where we sit today As you may know, our $1 billion term loan has a $10 million prepayment penalty that expires at the end of this month. as you may know our $1 billion term loan has a $10 million prepayment penalty that expires at the end of this month We haven't wanted to touch that until then. we haven't wanted to touch that until then At the same time, we're accumulating cash on our balance sheet, thanks to our disciplined operating approach. at the same time we're accumulating cash on our balance sheet thanks to our disciplined operating approach At the end of the quarter, you heard Saqib say that we had about $1.13 billion in cash. at the end of the quarter you heard saqib say that we had about $1.13 billion in cash That's after paying down the $200 million of convertible notes that came due during the quarter. that's after paying down the $200 million of convertible notes that came due during the quarter We're now approaching zero net debt, we need a lot less cash than we have on our books to operate our business, given the steady cash flows that our subscriptions business in particular generates. All of this gives us what I referred to in the remarks as profound strategic optionality. We're working with our banking partners on our plan. We're not ready to discuss the details of that plan right now, this is ultimately something I want to craft in conjunction with our new CFO once they're onboarded. I'll tell you the 4-part framework that we're using. First, we're trying to reduce our cost of capital. Our current term loan was entered into at a different time and under very different circumstances, we believe there's an opportunity to improve our borrowing rates. Second, we're trying to increase our flexibility. We're now approaching zero net debt, we need a lot less cash than we have on our books to operate our business, given the steady cash flows that our subscriptions business in particular generates. we're now approaching zero net debt we need a lot less cash than we have on our books to operate our business given the steady cash flows that our subscriptions business in particular generates All of this gives us what I referred to in the remarks as profound strategic optionality. all of this gives us what i referred to in the remarks as profound strategic optionality We're working with our banking partners on our plan. we're working with our banking partners on our plan We're not ready to discuss the details of that plan right now, this is ultimately something I want to craft in conjunction with our new CFO once they're onboarded. we're not ready to discuss the details of that plan right now this is ultimately something i want to craft in conjunction with our new cfo once they're onboarded I'll tell you the 4-part framework that we're using. i'll tell you the 4-part framework that we're using First, we're trying to reduce our cost of capital. first we're trying to reduce our cost of capital Our current term loan was entered into at a different time and under very different circumstances, we believe there's an opportunity to improve our borrowing rates. our current term loan was entered into at a different time and under very different circumstances we believe there's an opportunity to improve our borrowing rates Second, we're trying to increase our flexibility. second we're trying to increase our flexibility Our current term loan limits our ability to engage in shareholder-friendly actions like stock buybacks, and we'd like to reduce those types of restrictions. Third, you heard Saqib talk about this, we're working hard to find ways to reduce dilution. There are lots of ways of achieving this. We're already taking steps by reining in stock-based compensation and by moving to net settlement of restricted stock units rather than selling to cover for some of our executive officers. We're evaluating what else we can do here, including your suggestion of a repurchase. Fourth and last, we're making sure that we have the capital we need to operate our business sustainably and to invest in our future. This includes rigorously vetted organic and potentially inorganic investments. Our current term loan limits our ability to engage in shareholder-friendly actions like stock buybacks, and we'd like to reduce those types of restrictions. our current term loan limits our ability to engage in shareholder-friendly actions like stock buybacks and we'd like to reduce those types of restrictions Third, you heard Saqib talk about this, we're working hard to find ways to reduce dilution. third you heard saqib talk about this we're working hard to find ways to reduce dilution There are lots of ways of achieving this. there are lots of ways of achieving this We're already taking steps by reining in stock-based compensation and by moving to net settlement of restricted stock units rather than selling to cover for some of our executive officers. we're already taking steps by reining in stock-based compensation and by moving to net settlement of restricted stock units rather than selling to cover for some of our executive officers We're evaluating what else we can do here, including your suggestion of a repurchase. we're evaluating what else we can do here including your suggestion of a repurchase Fourth and last, we're making sure that we have the capital we need to operate our business sustainably and to invest in our future. fourth and last we're making sure that we have the capital we need to operate our business sustainably and to invest in our future This includes rigorously vetted organic and potentially inorganic investments. this includes rigorously vetted organic and potentially inorganic investments We'll have more to share on all of this after we've concluded our CFO search, but we have the luxury of time given the strength of our balance sheet. We'll have more to share on all of this after we've concluded our CFO search, but we have the luxury of time given the strength of our balance sheet. we'll have more to share on all of this after we've concluded our cfo search but we have the luxury of time given the strength of our balance sheet

Speaker 4: Great. Thanks, Peter. Cherie, you can open the line for Q&A. Great. great Thanks, Peter. thanks peter Cherie, you can open the line for Q&A. cherie you can open the line for q&a

Speaker 5: Thank you. As a reminder to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, press 11 again. Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. Please stand by while we compile the Q&A roster. Our first question will come from the line of Simeon Siegel with Guggenheim Securities. Your line is open. Thank you. thank you As a reminder to ask a question, please press 11 on your telephone and wait for your name to be announced. as a reminder to ask a question please press 11 on your telephone and wait for your name to be announced To withdraw your question, press 11 again. to withdraw your question press 11 again Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. due to time restraints we ask that you please limit yourself to one question and one follow-up question Please stand by while we compile the Q&A roster. please stand by while we compile the q&a roster Our first question will come from the line of Simeon Siegel with Guggenheim Securities. our first question will come from the line of simeon siegel with guggenheim securities Your line is open. your line is open

Speaker 9: Thanks. Hey, everyone. Morning. Peter, I just wanna make sure I understand the response to leaderboard member John. I don't remember the full name, but it was great. How are you thinking about the timing for the strategic actions? Are you suggesting it's a next month thing? Is it a wait for the CFO thing? Just any help on timing, giving the balance sheet really is in just such a different place than you were before. That's been great to see. Just a quick follow-up comment on the dilution, 'cause you mentioned it twice. I think you changed some approaches to how management's paid and incentivized late last year. Can you just speak to your philosophy around executive comp now and maybe what types of hurdles you think we should be judging you on going forward? Thank you. Thanks. thanks Hey, everyone. hey everyone Morning. morning Peter, I just wanna make sure I understand the response to leaderboard member John. peter i just wanna make sure i understand the response to leaderboard member john I don't remember the full name, but it was great. i don't remember the full name but it was great How are you thinking about the timing for the strategic actions? how are you thinking about the timing for the strategic actions Are you suggesting it's a next month thing? are you suggesting it's a next month thing Is it a wait for the CFO thing? is it a wait for the cfo thing Just any help on timing, giving the balance sheet really is in just such a different place than you were before. just any help on timing giving the balance sheet really is in just such a different place than you were before That's been great to see. that's been great to see Just a quick follow-up comment on the dilution, 'cause you mentioned it twice. just a quick follow-up comment on the dilution 'cause you mentioned it twice I think you changed some approaches to how management's paid and incentivized late last year. i think you changed some approaches to how management's paid and incentivized late last year Can you just speak to your philosophy around executive comp now and maybe what types of hurdles you think we should be judging you on going forward? can you just speak to your philosophy around executive comp now and maybe what types of hurdles you think we should be judging you on going forward Thank you. thank you

Speaker 6: Absolutely, Simeon, and congrats on the new gig, and we are so happy that you're back in the family. Absolutely, Simeon, and congrats on the new gig, and we are so happy that you're back in the family. absolutely simeon and congrats on the new gig and we are so happy that you're back in the family

Speaker 9: Thank you. Thank you. thank you

Speaker 6: I'll take the first part, and then I'll have Saqib talk about dilution and some of the changes on comp. As I said, First of all, we do have the ability to be patient. It doesn't mean that we that we feel it. We feel patient, but we have the ability to be patient here. As you know, debt maturities can span many years. We think it's unwise for us to rush the process. In particular, I didn't talk about this in my answer to John H. Schreiber, we intend to go through a credit ratings process prior to doing any refinancing. We wanna make sure we do that right the first time. It will be the first time that Peloton gets rated. I'll take the first part, and then I'll have Saqib talk about dilution and some of the changes on comp. i'll take the first part and then i'll have saqib talk about dilution and some of the changes on comp As I said, First of all, we do have the ability to be patient. as i said first of all we do have the ability to be patient It doesn't mean that we that we feel it. it doesn't mean that we that we feel it We feel patient, but we have the ability to be patient here. we feel patient but we have the ability to be patient here As you know, debt maturities can span many years. as you know debt maturities can span many years We think it's unwise for us to rush the process. we think it's unwise for us to rush the process In particular, I didn't talk about this in my answer to John H. in particular i didn't talk about this in my answer to john h Schreiber, we intend to go through a credit ratings process prior to doing any refinancing. schreiber we intend to go through a credit ratings process prior to doing any refinancing We wanna make sure we do that right the first time. we wanna make sure we do that right the first time It will be the first time that Peloton gets rated. it will be the first time that peloton gets rated Of course, as you know, the rating has a very substantial implication on the rates that we would pay over the years of that new debt instrument. We think we get a better outcome, both on cost of capital and flexibility, if we're a bit patient and do it right, and certainly that includes having a permanent CFO in the seat. Once they're there, we would begin that credit rating process. We'll evaluate the results of that credit rating process, and that will basically guide the pacing of any further actions we take, including the refinancing. Why don't we, I'll go to Saqib now, and you can talk a little bit about the dilution questions. Of course, as you know, the rating has a very substantial implication on the rates that we would pay over the years of that new debt instrument. of course as you know the rating has a very substantial implication on the rates that we would pay over the years of that new debt instrument We think we get a better outcome, both on cost of capital and flexibility, if we're a bit patient and do it right, and certainly that includes having a permanent CFO in the seat. we think we get a better outcome both on cost of capital and flexibility if we're a bit patient and do it right and certainly that includes having a permanent cfo in the seat Once they're there, we would begin that credit rating process. once they're there we would begin that credit rating process We'll evaluate the results of that credit rating process, and that will basically guide the pacing of any further actions we take, including the refinancing. we'll evaluate the results of that credit rating process and that will basically guide the pacing of any further actions we take including the refinancing Why don't we, I'll go to Saqib now, and you can talk a little bit about the dilution questions. why don't we i'll go to saqib now and you can talk a little bit about the dilution questions

Speaker 7: Yeah, sure, Peter. The impact of stock-based compensation on share dilution is top of mind, and reducing the dilution over time is a top priority for us. We are taking steps to reduce dilution. We are doing it through a net settlement program for equity vesting for select executives, as well as ongoing disciplined approach to equity compensation. Let me give a little bit more color on net settlement program. In that program, at equity vesting, the company would hold some of the vested shares rather than issuing and selling shares in the market to cover for employee taxes and delivers only the remaining shares to employees. Regarding our disciplined approach to equity compensation, you all can see that in the sequential improvement we have been making in our stock-based compensation expense. Yeah, sure, Peter. yeah sure peter The impact of stock-based compensation on share dilution is top of mind, and reducing the dilution over time is a top priority for us. the impact of stock-based compensation on share dilution is top of mind and reducing the dilution over time is a top priority for us We are taking steps to reduce dilution. we are taking steps to reduce dilution We are doing it through a net settlement program for equity vesting for select executives, as well as ongoing disciplined approach to equity compensation. we are doing it through a net settlement program for equity vesting for select executives as well as ongoing disciplined approach to equity compensation Let me give a little bit more color on net settlement program. let me give a little bit more color on net settlement program In that program, at equity vesting, the company would hold some of the vested shares rather than issuing and selling shares in the market to cover for employee taxes and delivers only the remaining shares to employees. in that program at equity vesting the company would hold some of the vested shares rather than issuing and selling shares in the market to cover for employee taxes and delivers only the remaining shares to employees Regarding our disciplined approach to equity compensation, you all can see that in the sequential improvement we have been making in our stock-based compensation expense. regarding our disciplined approach to equity compensation you all can see that in the sequential improvement we have been making in our stock-based compensation expense Stepping down from $300 million in fiscal 2024 to $230 million in fiscal 2025, we are tracking around $200 million in fiscal 2026. Looking ahead, we see this expense continuing to step down in fiscal 2027 and beyond. We have also taken significant steps to pay more on performance-based awards in our organization, and we have structured our SBC awards to better align with this approach going forward. One thing you guys can also note is we are awarding fewer RSUs over time. For example, if you compare our 10-K disclosure in fiscal 2025 versus fiscal 2024, you'll notice a substantial reduction in the number of shares granted. Stepping down from $300 million in fiscal 2024 to $230 million in fiscal 2025, we are tracking around $200 million in fiscal 2026. stepping down from $300 million in fiscal 2024 to $230 million in fiscal 2025 we are tracking around $200 million in fiscal 2026 Looking ahead, we see this expense continuing to step down in fiscal 2027 and beyond. looking ahead we see this expense continuing to step down in fiscal 2027 and beyond We have also taken significant steps to pay more on performance-based awards in our organization, and we have structured our SBC awards to better align with this approach going forward. we have also taken significant steps to pay more on performance-based awards in our organization and we have structured our sbc awards to better align with this approach going forward One thing you guys can also note is we are awarding fewer RSUs over time. one thing you guys can also note is we are awarding fewer rsus over time For example, if you compare our 10-K disclosure in fiscal 2025 versus fiscal 2024, you'll notice a substantial reduction in the number of shares granted. for example if you compare our 10-k disclosure in fiscal 2025 versus fiscal 2024 you'll notice a substantial reduction in the number of shares granted One thing I would also like to highlight, because the compensation structure has a multi-year grant, we recognize the benefit over time due to the impact of grants vesting from prior years. One thing I would also like to highlight, because the compensation structure has a multi-year grant, we recognize the benefit over time due to the impact of grants vesting from prior years. one thing i would also like to highlight because the compensation structure has a multi-year grant we recognize the benefit over time due to the impact of grants vesting from prior years

Speaker 4: Operator next question. Operator next question. operator next question

Speaker 9: Great. Thanks, guys. Best of luck. Great. great Thanks, guys. thanks guys Best of luck. best of luck

Speaker 5: One moment for our next question. That will come from the line of Arpine Kocharian with UBS. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Arpine Kocharian with UBS. that will come from the line of arpine kocharian with ubs Your line is open. your line is open

Speaker 1: Hi. Thanks, and good morning. Churn has surprised to the upside for more than three, four consecutive quarters for Peloton here. Peter, do you see churn trend stabilizing enough for you to then think about the delta between subscribers that are churning annually versus gross adds? How you look to close that gap over time? Hi. hi Thanks, and good morning. thanks and good morning Churn has surprised to the upside for more than three, four consecutive quarters for Peloton here. churn has surprised to the upside for more than three four consecutive quarters for peloton here Peter, do you see churn trend stabilizing enough for you to then think about the delta between subscribers that are churning annually versus gross adds? peter do you see churn trend stabilizing enough for you to then think about the delta between subscribers that are churning annually versus gross adds How you look to close that gap over time? how you look to close that gap over time

Speaker 6: Thanks, Arpine. We feel good about our Q3 churn results. Ultimately, your question goes to, I think, you know, when do we reach the point where the two lines of our gross adds and our subscriber churn cross such that we get to net adds and subscribers. Let me talk a little bit about what we're seeing there. On gross adds, while the number is still declining, the year-over-year rate of decline in gross adds in Q3 of this year is lower than last year. We're seeing a decelerating rate of decline. On churn, after adjusting for the impact of our pricing changes, we're also seeing that our net churn rates are improving on a year-over-year basis. Putting those two things together, right? Thanks, Arpine. thanks arpine We feel good about our Q3 churn results. we feel good about our q3 churn results Ultimately, your question goes to, I think, you know, when do we reach the point where the two lines of our gross adds and our subscriber churn cross such that we get to net adds and subscribers. ultimately your question goes to i think you know when do we reach the point where the two lines of our gross adds and our subscriber churn cross such that we get to net adds and subscribers Let me talk a little bit about what we're seeing there. let me talk a little bit about what we're seeing there On gross adds, while the number is still declining, the year-over-year rate of decline in gross adds in Q3 of this year is lower than last year. on gross adds while the number is still declining the year-over-year rate of decline in gross adds in q3 of this year is lower than last year We're seeing a decelerating rate of decline. we're seeing a decelerating rate of decline On churn, after adjusting for the impact of our pricing changes, we're also seeing that our net churn rates are improving on a year-over-year basis. on churn after adjusting for the impact of our pricing changes we're also seeing that our net churn rates are improving on a year-over-year basis Putting those two things together, right? putting those two things together right If that keeps changing in the ways that I've described, then we would start to see subscriptions growth. A big goal for us as a management team is on how we accelerate the pace at which that convergence happens while making sure that we do it in a sustainable and profitable way. Because as you can tell from our results, we remain really disciplined in our marketing spend so that our burdened LTV to CAC ratio remains efficient. In other words, we will not engage in unnatural acts to bend this curve. Ultimately, the way forward here, the way to move the needle on gross adds is through our investments in R&D, which will result in us introducing new products that are more accessible in our existing categories while launching new categories as well. If that keeps changing in the ways that I've described, then we would start to see subscriptions growth. if that keeps changing in the ways that i've described then we would start to see subscriptions growth A big goal for us as a management team is on how we accelerate the pace at which that convergence happens while making sure that we do it in a sustainable and profitable way. a big goal for us as a management team is on how we accelerate the pace at which that convergence happens while making sure that we do it in a sustainable and profitable way Because as you can tell from our results, we remain really disciplined in our marketing spend so that our burdened LTV to CAC ratio remains efficient. because as you can tell from our results we remain really disciplined in our marketing spend so that our burdened ltv to cac ratio remains efficient In other words, we will not engage in unnatural acts to bend this curve. in other words we will not engage in unnatural acts to bend this curve Ultimately, the way forward here, the way to move the needle on gross adds is through our investments in R&D, which will result in us introducing new products that are more accessible in our existing categories while launching new categories as well. ultimately the way forward here the way to move the needle on gross adds is through our investments in r&d which will result in us introducing new products that are more accessible in our existing categories while launching new categories as well I do wanna point out that in the meantime, while we wait for subscribers to turn, we have a lot of vectors for revenue growth that don't result in paid connected fitness subscriptions. You'll likely see inflections in growth in revenue before you see them in subscribers, and this past quarter was an example of that. Some of the vectors that are at play this quarter and will be in the future are selling additional equipment to our existing members. That doesn't generate more subscriptions, but it does generate revenue. The revenue from our Commercial Business Unit, which we talked about earlier, and that grew 14% year-over-year in the last quarter. That's predominantly equipment-based. It doesn't come with very many subscribers. The Spotify deal that we just announced is a revenue driver, but those aren't our subscribers, those are Spotify subscribers. I do wanna point out that in the meantime, while we wait for subscribers to turn, we have a lot of vectors for revenue growth that don't result in paid connected fitness subscriptions. i do wanna point out that in the meantime while we wait for subscribers to turn we have a lot of vectors for revenue growth that don't result in paid connected fitness subscriptions You'll likely see inflections in growth in revenue before you see them in subscribers, and this past quarter was an example of that. you'll likely see inflections in growth in revenue before you see them in subscribers and this past quarter was an example of that Some of the vectors that are at play this quarter and will be in the future are selling additional equipment to our existing members. some of the vectors that are at play this quarter and will be in the future are selling additional equipment to our existing members That doesn't generate more subscriptions, but it does generate revenue. that doesn't generate more subscriptions but it does generate revenue The revenue from our Commercial Business Unit, which we talked about earlier, and that grew 14% year-over-year in the last quarter. the revenue from our commercial business unit which we talked about earlier and that grew 14% year-over-year in the last quarter That's predominantly equipment-based. that's predominantly equipment-based It doesn't come with very many subscribers. it doesn't come with very many subscribers The Spotify deal that we just announced is a revenue driver, but those aren't our subscribers, those are Spotify subscribers. the spotify deal that we just announced is a revenue driver but those aren't our subscribers those are spotify subscribers The pricing changes, again, that was a real positive impact in Q3. No subscribers attached to that, but real high-margin revenue. Even the promotional levers that you saw us pull in Q3, which helped us beat on revenue, don't come with particularly more subscribers, or it's an indirect connection, but it does generate the revenue. So that's a little bit of what should help tide us all over while we wait for the ultimate growth in subscribers. The pricing changes, again, that was a real positive impact in Q3. the pricing changes again that was a real positive impact in q3 No subscribers attached to that, but real high-margin revenue. no subscribers attached to that but real high-margin revenue Even the promotional levers that you saw us pull in Q3, which helped us beat on revenue, don't come with particularly more subscribers, or it's an indirect connection, but it does generate the revenue. even the promotional levers that you saw us pull in q3 which helped us beat on revenue don't come with particularly more subscribers or it's an indirect connection but it does generate the revenue So that's a little bit of what should help tide us all over while we wait for the ultimate growth in subscribers. so that's a little bit of what should help tide us all over while we wait for the ultimate growth in subscribers

Speaker 4: Great. Next question. Great. great Next question. next question

Speaker 1: That's very, very helpful. Thank you. That's very, very helpful. that's very very helpful Thank you. thank you

Speaker 5: One moment for our next question. That will come from the line of Youssef Squali with Truist. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Youssef Squali with Truist. that will come from the line of youssef squali with truist Your line is open. your line is open

Speaker 10: Great. Thank you very much, good morning, guys. Nice to see you guys making real progress on some of these important KPIs. Maybe a couple questions. One, maybe talk a little bit about the promotional intensity you saw in Q3. I think you called that out as one of the drivers of gross margin. Try to reconcile basically your Q4 guide for connected fitness subscribers with your comments around churn being relatively flat. Maybe just give us some color as to what's going on outside of maybe the seasonally weak period that is this quarter we're going into. Is there anything else going on? Maybe you're pulling back on promotional intensity that you've done in Q3. Then just one last one. Peter, you talked a little bit about new hardware coming this fall. Great. great Thank you very much, good morning, guys. thank you very much good morning guys Nice to see you guys making real progress on some of these important KPIs. nice to see you guys making real progress on some of these important kpis Maybe a couple questions. maybe a couple questions One, maybe talk a little bit about the promotional intensity you saw in Q3. one maybe talk a little bit about the promotional intensity you saw in q3 I think you called that out as one of the drivers of gross margin. i think you called that out as one of the drivers of gross margin Try to reconcile basically your Q4 guide for connected fitness subscribers with your comments around churn being relatively flat. try to reconcile basically your q4 guide for connected fitness subscribers with your comments around churn being relatively flat Maybe just give us some color as to what's going on outside of maybe the seasonally weak period that is this quarter we're going into. maybe just give us some color as to what's going on outside of maybe the seasonally weak period that is this quarter we're going into Is there anything else going on? is there anything else going on Maybe you're pulling back on promotional intensity that you've done in Q3. maybe you're pulling back on promotional intensity that you've done in q3 Then just one last one. then just one last one Peter, you talked a little bit about new hardware coming this fall. peter you talked a little bit about new hardware coming this fall Maybe can you just provide some preview of what those may be? I think new modalities. Would strength be part of it? Would a cheaper tread be part of it? Just any kind of color you can provide, knowing that obviously, you know, you'll provide a lot more this fall, more details. Thank you. Maybe can you just provide some preview of what those may be? maybe can you just provide some preview of what those may be I think new modalities. i think new modalities Would strength be part of it? would strength be part of it Would a cheaper tread be part of it? would a cheaper tread be part of it Just any kind of color you can provide, knowing that obviously, you know, you'll provide a lot more this fall, more details. just any kind of color you can provide knowing that obviously you know you'll provide a lot more this fall more details Thank you. thank you

Speaker 6: Thanks, Youssef. There's a lot in there. Let me do my best to try to cover all of it. As I said in my remarks, we use an LTV to CAC framework to drive our marketing and our promotional spend, right? We like that framework because it's inclusive of everything from how much money we spend on marketing to how aggressive we are on promotions. What we saw about a month or so into the quarter was that we had real marketing efficiency. We took that opportunity to do a couple of things. One, we had a promotion that was planned to expire sometime toward the end of February. We extended that promotion an extra week or so. Thanks, Youssef. thanks youssef There's a lot in there. there's a lot in there Let me do my best to try to cover all of it. let me do my best to try to cover all of it As I said in my remarks, we use an LTV to CAC framework to drive our marketing and our promotional spend, right? as i said in my remarks we use an ltv to cac framework to drive our marketing and our promotional spend right We like that framework because it's inclusive of everything from how much money we spend on marketing to how aggressive we are on promotions. we like that framework because it's inclusive of everything from how much money we spend on marketing to how aggressive we are on promotions What we saw about a month or so into the quarter was that we had real marketing efficiency. what we saw about a month or so into the quarter was that we had real marketing efficiency We took that opportunity to do a couple of things. we took that opportunity to do a couple of things One, we had a promotion that was planned to expire sometime toward the end of February. one we had a promotion that was planned to expire sometime toward the end of february We extended that promotion an extra week or so. we extended that promotion an extra week or so We also saw an opportunity to take a little bit of a deeper price promotion on a variety of our pieces of equipment throughout the sort of back half of the quarter in order to take advantage of that. We were still able to land our LTV to CAC at 2x, which is in our long-term goal range for LTV to CAC. That's basically what happened in Q3 on that front. We don't have any plans to repeat that activity in Q4. Our guidance reflects the expectation that our growth, our gross additions will continue declining year-over-year, and that's just us remaining disciplined. Also being increasingly, I think, sophisticated about the best times to be promotional. We also saw an opportunity to take a little bit of a deeper price promotion on a variety of our pieces of equipment throughout the sort of back half of the quarter in order to take advantage of that. we also saw an opportunity to take a little bit of a deeper price promotion on a variety of our pieces of equipment throughout the sort of back half of the quarter in order to take advantage of that We were still able to land our LTV to CAC at 2x, which is in our long-term goal range for LTV to CAC. we were still able to land our ltv to cac at 2x which is in our long-term goal range for ltv to cac That's basically what happened in Q3 on that front. that's basically what happened in q3 on that front We don't have any plans to repeat that activity in Q4. we don't have any plans to repeat that activity in q4 Our guidance reflects the expectation that our growth, our gross additions will continue declining year-over-year, and that's just us remaining disciplined. our guidance reflects the expectation that our growth our gross additions will continue declining year-over-year and that's just us remaining disciplined Also being increasingly, I think, sophisticated about the best times to be promotional. also being increasingly i think sophisticated about the best times to be promotional We've done a lot of work, looked at our successes and our failures in the past, and we see that the periods where we acted in Q3 are some of the most productive ones. Q4, as you mentioned, seasonality on the churn side is also a seasonal period for equipment sales as well. Now turning to your question on gross adds and our guide. The seasonality we just talked about, you raised that as well. That is something well known in our business. I also talked about pulling back on promotional intensity and remaining disciplined on our marketing investment. All of that basically adds up to the Q4 that we're projecting. We've done a lot of work, looked at our successes and our failures in the past, and we see that the periods where we acted in Q3 are some of the most productive ones. we've done a lot of work looked at our successes and our failures in the past and we see that the periods where we acted in q3 are some of the most productive ones Q4, as you mentioned, seasonality on the churn side is also a seasonal period for equipment sales as well. q4 as you mentioned seasonality on the churn side is also a seasonal period for equipment sales as well Now turning to your question on gross adds and our guide. now turning to your question on gross adds and our guide The seasonality we just talked about, you raised that as well. the seasonality we just talked about you raised that as well That is something well known in our business. that is something well known in our business I also talked about pulling back on promotional intensity and remaining disciplined on our marketing investment. i also talked about pulling back on promotional intensity and remaining disciplined on our marketing investment All of that basically adds up to the Q4 that we're projecting. all of that basically adds up to the q4 that we're projecting With regard to the question that you had about our new equipment, for competitive reasons and because it's an earnings call, not a big product reveal moment, I'm not gonna comment specifically on our unannounced hardware today. I'll just elaborate a bit and say that, one, bringing more price accessibility in our existing modalities is a top priority for us. We have the ability to do this in the bike category because we've been able to take advantage of the large reservoir of refurb inventory that we have available to us. We have not had a similar opportunity in our other categories. That's really driving our R&D in that area. With regard to new modalities, I wanna note that they do take a little longer because we're building from the ground up. With regard to the question that you had about our new equipment, for competitive reasons and because it's an earnings call, not a big product reveal moment, I'm not gonna comment specifically on our unannounced hardware today. with regard to the question that you had about our new equipment for competitive reasons and because it's an earnings call not a big product reveal moment i'm not gonna comment specifically on our unannounced hardware today I'll just elaborate a bit and say that, one, bringing more price accessibility in our existing modalities is a top priority for us. i'll just elaborate a bit and say that one bringing more price accessibility in our existing modalities is a top priority for us We have the ability to do this in the bike category because we've been able to take advantage of the large reservoir of refurb inventory that we have available to us. we have the ability to do this in the bike category because we've been able to take advantage of the large reservoir of refurb inventory that we have available to us We have not had a similar opportunity in our other categories. we have not had a similar opportunity in our other categories That's really driving our R&D in that area. that's really driving our r&d in that area With regard to new modalities, I wanna note that they do take a little longer because we're building from the ground up. with regard to new modalities i wanna note that they do take a little longer because we're building from the ground up As you mentioned, I will remind you that we're already a leader in the strength category. We have roughly 2 million of our members engaging with strength every quarter. We see an opportunity to broaden our equipment portfolio in that category. I wouldn't even view that as a singular opportunity. I think there are multiple opportunities for us to pursue that category, which we define as all forms of resistance training. I hope that tides you over. As you mentioned, I will remind you that we're already a leader in the strength category. as you mentioned i will remind you that we're already a leader in the strength category We have roughly 2 million of our members engaging with strength every quarter. we have roughly 2 million of our members engaging with strength every quarter We see an opportunity to broaden our equipment portfolio in that category. we see an opportunity to broaden our equipment portfolio in that category I wouldn't even view that as a singular opportunity. i wouldn't even view that as a singular opportunity I think there are multiple opportunities for us to pursue that category, which we define as all forms of resistance training. i think there are multiple opportunities for us to pursue that category which we define as all forms of resistance training I hope that tides you over. i hope that tides you over

Speaker 10: Yep, that answers it all. Thanks, Peter. Yep, that answers it all. yep that answers it all Thanks, Peter. thanks peter

Speaker 5: One moment- One moment- one moment-

Speaker 4: I'll go to the next question. I'll go to the next question. i'll go to the next question

Speaker 5: One moment for our next question. That will come from the line of Doug Anmuth with JPMorgan. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Doug Anmuth with JPMorgan. that will come from the line of doug anmuth with jpmorgan Your line is open. your line is open

Speaker 3: Great. Thanks. It's Bryan Smilek on for Doug. I guess just two questions. You know, obviously good to see the acceleration on the Commercial Series and revenue overall. Could you just elaborate more on the demand pipeline and how the product and go-to-market strategy is changing, especially as you launch the new products in 2027? Then I guess more so on the marketing side, Peter, you talked about managing towards that two to three times average LTV to CAC. Can you talk about some channels where you're seeing some of this efficiency and spend that allowed you to, you know, get those deeper promos throughout the quarter? Thank you. Great. great Thanks. thanks It's Bryan Smilek on for Doug. it's bryan smilek on for doug I guess just two questions. i guess just two questions You know, obviously good to see the acceleration on the Commercial Series and revenue overall. you know obviously good to see the acceleration on the commercial series and revenue overall Could you just elaborate more on the demand pipeline and how the product and go-to-market strategy is changing, especially as you launch the new products in 2027? could you just elaborate more on the demand pipeline and how the product and go-to-market strategy is changing especially as you launch the new products in 2027 Then I guess more so on the marketing side, Peter, you talked about managing towards that two to three times average LTV to CAC. then i guess more so on the marketing side peter you talked about managing towards that two to three times average ltv to cac Can you talk about some channels where you're seeing some of this efficiency and spend that allowed you to, you know, get those deeper promos throughout the quarter? can you talk about some channels where you're seeing some of this efficiency and spend that allowed you to you know get those deeper promos throughout the quarter Thank you. thank you

Speaker 7: Yeah. Thank you. I can start with the commercial and the business overview. Just to double-click on the Q3 performance, as Peter covered in his remarks, is where that CBU grew year-over-year 14% in Q3. As we look ahead in Q4, we expect CBU revenue growth to be a little softer in Q4 due to elevated CBU revenue in Q4 of last year as we experienced increased demand ahead of tariff surcharges, which were announced in Q4 of FY 2025. We just, you know, want you guys to have a context of that. Yeah. yeah Thank you. thank you I can start with the commercial and the business overview. i can start with the commercial and the business overview Just to double-click on the Q3 performance, as Peter covered in his remarks, is where that CBU grew year-over-year 14% in Q3. just to double-click on the q3 performance as peter covered in his remarks is where that cbu grew year-over-year 14% in q3 As we look ahead in Q4, we expect CBU revenue growth to be a little softer in Q4 due to elevated CBU revenue in Q4 of last year as we experienced increased demand ahead of tariff surcharges, which were announced in Q4 of FY 2025. as we look ahead in q4 we expect cbu revenue growth to be a little softer in q4 due to elevated cbu revenue in q4 of last year as we experienced increased demand ahead of tariff surcharges which were announced in q4 of fy 2025 We just, you know, want you guys to have a context of that. we just you know want you guys to have a context of that When we think about the long-term growth potential for the commercial business, we see tremendous opportunity. We estimate that we roughly have around 3% of a growing $10 billion commercial fitness equipment segment market share. The commercial fitness market is expanding as we observe rising global health awareness. When we think about the long-term growth potential for the commercial business, we see tremendous opportunity. when we think about the long-term growth potential for the commercial business we see tremendous opportunity We estimate that we roughly have around 3% of a growing $10 billion commercial fitness equipment segment market share. we estimate that we roughly have around 3% of a growing $10 billion commercial fitness equipment segment market share The commercial fitness market is expanding as we observe rising global health awareness. the commercial fitness market is expanding as we observe rising global health awareness We're seeing growth in gym and corporate wellness centers, also an increased demand for digitally enabled fitness facilities. All of these things drive demand for our high-quality equipment. We believe we have multiple growth vectors, and a lot of them are gonna play in the long run, but some of them in the short term as well. First, growing the legacy Precor business, we can do that through sales enablement, channel partnership, investing in our strategy account. This is the core of our CBU business today. We're seeing growth in gym and corporate wellness centers, also an increased demand for digitally enabled fitness facilities. we're seeing growth in gym and corporate wellness centers also an increased demand for digitally enabled fitness facilities All of these things drive demand for our high-quality equipment. all of these things drive demand for our high-quality equipment We believe we have multiple growth vectors, and a lot of them are gonna play in the long run, but some of them in the short term as well. we believe we have multiple growth vectors and a lot of them are gonna play in the long run but some of them in the short term as well First, growing the legacy Precor business, we can do that through sales enablement, channel partnership, investing in our strategy account. first growing the legacy precor business we can do that through sales enablement channel partnership investing in our strategy account This is the core of our CBU business today. this is the core of our cbu business today We see an opportunity in investing a commercial product roadmap. You just highlighted that this quarter we announced the Commercial Series, which will feature a bike and a tread built specifically for high traffic gym floors. This is a milestone that combines Peloton digital fitness leadership with Precor trusted industrial scale, and we have received great feedback, two of the leading industry events in this space and look forward to bringing these into the market in fiscal 2027. The third thing that I would like to highlight is the opportunity for international expansion, which is a big opportunity for CBU by leveraging Precor existing global presence to grow the Peloton brand. Currently, we believe CBU is underrepresented outside of the U.S., and we believe we have significant room to grow our market share internationally. We see an opportunity in investing a commercial product roadmap. we see an opportunity in investing a commercial product roadmap You just highlighted that this quarter we announced the Commercial Series, which will feature a bike and a tread built specifically for high traffic gym floors. you just highlighted that this quarter we announced the commercial series which will feature a bike and a tread built specifically for high traffic gym floors This is a milestone that combines Peloton digital fitness leadership with Precor trusted industrial scale, and we have received great feedback, two of the leading industry events in this space and look forward to bringing these into the market in fiscal 2027. this is a milestone that combines peloton digital fitness leadership with precor trusted industrial scale and we have received great feedback two of the leading industry events in this space and look forward to bringing these into the market in fiscal 2027 The third thing that I would like to highlight is the opportunity for international expansion, which is a big opportunity for CBU by leveraging Precor existing global presence to grow the Peloton brand. the third thing that i would like to highlight is the opportunity for international expansion which is a big opportunity for cbu by leveraging precor existing global presence to grow the peloton brand Currently, we believe CBU is underrepresented outside of the U.S., and we believe we have significant room to grow our market share internationally. currently we believe cbu is underrepresented outside of the u.s and we believe we have significant room to grow our market share internationally

Speaker 6: Let me cover the second question that you asked, which was about the various channels that we have and their impact on our LTV to CAC. Let me focus on our first party versus our secondhand sales versus our third party sales. In 1P sales, we saw good efficiency on web. Of course, you know, a lot of that is driven by our email marketing. We have a team that is just absolutely a crack team at working the funnel and getting ever more efficient at customer acquisition with the leads that we generate. Within our first party retail, we continued to see really encouraging results from our micro stores. Let me cover the second question that you asked, which was about the various channels that we have and their impact on our LTV to CAC. let me cover the second question that you asked which was about the various channels that we have and their impact on our ltv to cac Let me focus on our first party versus our secondhand sales versus our third party sales. let me focus on our first party versus our secondhand sales versus our third party sales In 1P sales, we saw good efficiency on web. in 1p sales we saw good efficiency on web Of course, you know, a lot of that is driven by our email marketing. of course you know a lot of that is driven by our email marketing We have a team that is just absolutely a crack team at working the funnel and getting ever more efficient at customer acquisition with the leads that we generate. we have a team that is just absolutely a crack team at working the funnel and getting ever more efficient at customer acquisition with the leads that we generate Within our first party retail, we continued to see really encouraging results from our micro stores. within our first party retail we continued to see really encouraging results from our micro stores That is relative to our in-line stores, where I think our micro stores are actually now, despite being, give or take 1/10 the size of our in-line stores, they're significantly more productive than the in-line stores. It shows some of the things that we've learned about the about the positioning of those stores. That has given us the confidence to begin investing in the next round of micro stores that we'll have in line for our fiscal 2027. We also saw good customer acquisition from secondhand sales, which in the quarter generated more than half of our gross adds, and that is influenced by our marketing, right? That is relative to our in-line stores, where I think our micro stores are actually now, despite being, give or take 1/10 the size of our in-line stores, they're significantly more productive than the in-line stores. that is relative to our in-line stores where i think our micro stores are actually now despite being give or take 1/10 the size of our in-line stores they're significantly more productive than the in-line stores It shows some of the things that we've learned about the about the positioning of those stores. it shows some of the things that we've learned about the about the positioning of those stores That has given us the confidence to begin investing in the next round of micro stores that we'll have in line for our fiscal 2027. that has given us the confidence to begin investing in the next round of micro stores that we'll have in line for our fiscal 2027 We also saw good customer acquisition from secondhand sales, which in the quarter generated more than half of our gross adds, and that is influenced by our marketing, right? we also saw good customer acquisition from secondhand sales which in the quarter generated more than half of our gross adds and that is influenced by our marketing right What we've found in our path to purchase research is that when we market to members, then that begins a process for them of discovering all the ways that they can get access to Peloton equipment. Some of them choose to do so, for example, through Facebook Marketplace, or through our Repowered marketplace. That has turned out to be very productive for us. Relatively less productive in the quarter were our third-party retail and our fitness as a service rental business. Those, I would say, just to round out the answer to your question, were among the less productive channels. What we've found in our path to purchase research is that when we market to members, then that begins a process for them of discovering all the ways that they can get access to Peloton equipment. what we've found in our path to purchase research is that when we market to members then that begins a process for them of discovering all the ways that they can get access to peloton equipment Some of them choose to do so, for example, through Facebook Marketplace, or through our Repowered marketplace. some of them choose to do so for example through facebook marketplace or through our repowered marketplace That has turned out to be very productive for us. that has turned out to be very productive for us Relatively less productive in the quarter were our third-party retail and our fitness as a service rental business. relatively less productive in the quarter were our third-party retail and our fitness as a service rental business Those, I would say, just to round out the answer to your question, were among the less productive channels. those i would say just to round out the answer to your question were among the less productive channels

Speaker 3: Great. Thank you, Peter. Appreciate it. Great. great Thank you, Peter. thank you peter Appreciate it. appreciate it

Speaker 5: One moment for our next question. That will come from the line of Brian Nagel with Oppenheimer. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Brian Nagel with Oppenheimer. that will come from the line of brian nagel with oppenheimer Your line is open. your line is open

Speaker 2: Hey, guys. Good morning. I appreciate you taking my questions. Peter, the question I'm asking, I guess a little bit bigger picture. You know, recognizing you haven't provided official guidance, you know, beyond this current fiscal year. In your-- the commentary, around, you know, the evolution of Peloton to more of a wellness company and some of these green shoots you're starting to see on that front, how long Again, what's the duration till we see some type of, you know, within the total company results, right? The a real inflection as a result of these efforts. I mean, is it I guess, is it an event that we could expect in the next fiscal year? Are we waiting longer than that? Hey, guys. hey guys Good morning. good morning I appreciate you taking my questions. i appreciate you taking my questions Peter, the question I'm asking, I guess a little bit bigger picture. peter the question i'm asking i guess a little bit bigger picture You know, recognizing you haven't provided official guidance, you know, beyond this current fiscal year. you know recognizing you haven't provided official guidance you know beyond this current fiscal year In your-- the commentary, around, you know, the evolution of Peloton to more of a wellness company and some of these green shoots you're starting to see on that front, how long Again, what's the duration till we see some type of, you know, within the total company results, right? in your-- the commentary around you know the evolution of peloton to more of a wellness company and some of these green shoots you're starting to see on that front how long again what's the duration till we see some type of you know within the total company results right The a real inflection as a result of these efforts. the a real inflection as a result of these efforts I mean, is it I guess, is it an event that we could expect in the next fiscal year? i mean is it i guess is it an event that we could expect in the next fiscal year Are we waiting longer than that? are we waiting longer than that My follow-up question, you know, just to kinda tie this all together, you know, again, I appreciate all the comments with regards to balance sheet. You know, this forthcoming balance sheet rework, you know, how critical is that in order to drive, you know, this next leg of growth within Peloton? Thank you. My follow-up question, you know, just to kinda tie this all together, you know, again, I appreciate all the comments with regards to balance sheet. my follow-up question you know just to kinda tie this all together you know again i appreciate all the comments with regards to balance sheet You know, this forthcoming balance sheet rework, you know, how critical is that in order to drive, you know, this next leg of growth within Peloton? you know this forthcoming balance sheet rework you know how critical is that in order to drive you know this next leg of growth within peloton Thank you. thank you

Speaker 6: Brian, thank you. I think the question you're asking is how long do we have to wait until we get back to sustained growth? There's a couple of ways of looking at that, right? One is subscriptions, the other is revenue. As I've shared earlier in the call, what we can expect is revenue to come ahead of subscriptions. We're not ready at this point to call when we get back to subscriptions growth. I was very pleased that we were able to deliver a Q3 with positive revenue growth. While we won't see that likely sustain in Q4 based on our implied guidance for the quarter, I think we're now in a stage where hopefully we'll see some steps forward and some steps back as we right the ship. Brian, thank you. brian thank you I think the question you're asking is how long do we have to wait until we get back to sustained growth? i think the question you're asking is how long do we have to wait until we get back to sustained growth There's a couple of ways of looking at that, right? there's a couple of ways of looking at that right One is subscriptions, the other is revenue. one is subscriptions the other is revenue As I've shared earlier in the call, what we can expect is revenue to come ahead of subscriptions. as i've shared earlier in the call what we can expect is revenue to come ahead of subscriptions We're not ready at this point to call when we get back to subscriptions growth. we're not ready at this point to call when we get back to subscriptions growth I was very pleased that we were able to deliver a Q3 with positive revenue growth. i was very pleased that we were able to deliver a q3 with positive revenue growth While we won't see that likely sustain in Q4 based on our implied guidance for the quarter, I think we're now in a stage where hopefully we'll see some steps forward and some steps back as we right the ship. while we won't see that likely sustain in q4 based on our implied guidance for the quarter i think we're now in a stage where hopefully we'll see some steps forward and some steps back as we right the ship The ways that we do that are not only by continuing to build on our leadership in cardio, but as we talked about on this call, starting to expand our impact into some areas like strength, where we know that there is substantial untapped opportunity, and we have a really ambitious R&D agenda. It's also in things like what we're doing in mental well-being, where we're generating now Peloton content for the Breathwrk app, and that will generate revenue, but app subscribers, not CF subscribers, which are the ones that we typically see investors tracking. We're also making progress in some other areas like nutrition and hydration, and we'll have more to share about that hopefully in the not too distant future. The ways that we do that are not only by continuing to build on our leadership in cardio, but as we talked about on this call, starting to expand our impact into some areas like strength, where we know that there is substantial untapped opportunity, and we have a really ambitious R&D agenda. It's also in things like what we're doing in mental well-being, where we're generating now Peloton content for the Breathwrk app, and that will generate revenue, but app subscribers, not CF subscribers, which are the ones that we typically see investors tracking. the ways that we do that are not only by continuing to build on our leadership in cardio but as we talked about on this call starting to expand our impact into some areas like strength where we know that there is substantial untapped opportunity and we have a really ambitious r&d agenda. it's also in things like what we're doing in mental well-being where we're generating now peloton content for the breathwrk app and that will generate revenue but app subscribers not cf subscribers which are the ones that we typically see investors tracking We're also making progress in some other areas like nutrition and hydration, and we'll have more to share about that hopefully in the not too distant future. we're also making progress in some other areas like nutrition and hydration and we'll have more to share about that hopefully in the not too distant future We also find, of course, that when members engage in multiple modalities, they stay with us longer, and that can positively move the trajectory on subscriptions as well as revenue. For example, the category of sleep is one where we're already a leader in sleep meditations. I made sure to take one last night before this morning's call, and I'd encourage everyone to do that. Those are some of the categories and the areas that will first get us back to revenue growth and then ultimately set the stage for the subscriptions turn. With regard to the balance sheet, we don't need to refinance in order to be able to drive the strategy that we described. We also find, of course, that when members engage in multiple modalities, they stay with us longer, and that can positively move the trajectory on subscriptions as well as revenue. we also find of course that when members engage in multiple modalities they stay with us longer and that can positively move the trajectory on subscriptions as well as revenue For example, the category of sleep is one where we're already a leader in sleep meditations. for example the category of sleep is one where we're already a leader in sleep meditations I made sure to take one last night before this morning's call, and I'd encourage everyone to do that. i made sure to take one last night before this morning's call and i'd encourage everyone to do that Those are some of the categories and the areas that will first get us back to revenue growth and then ultimately set the stage for the subscriptions turn. those are some of the categories and the areas that will first get us back to revenue growth and then ultimately set the stage for the subscriptions turn With regard to the balance sheet, we don't need to refinance in order to be able to drive the strategy that we described. with regard to the balance sheet we don't need to refinance in order to be able to drive the strategy that we described We'd be foolish not to, because we are, from where we sit right now, paying more interest than we need to. That could generate additional funds for free cash flow or for investments. That refinancing would also give us the flexibility to engage in shareholder-friendly actions like buybacks that could help reduce the float and address the dilution that we know is on many of our investors' minds. All of those things are absolutely on the table, along with the fact that under the right circumstances, and it would require, you know, the right price and real discipline and rigor, because we've worked super hard to accumulate this money, so we're not gonna fritter it away. If the right investment or acquisition opportunities come to us, we'll take those really seriously. We'd be foolish not to, because we are, from where we sit right now, paying more interest than we need to. we'd be foolish not to because we are from where we sit right now paying more interest than we need to That could generate additional funds for free cash flow or for investments. that could generate additional funds for free cash flow or for investments That refinancing would also give us the flexibility to engage in shareholder-friendly actions like buybacks that could help reduce the float and address the dilution that we know is on many of our investors' minds. that refinancing would also give us the flexibility to engage in shareholder-friendly actions like buybacks that could help reduce the float and address the dilution that we know is on many of our investors' minds All of those things are absolutely on the table, along with the fact that under the right circumstances, and it would require, you know, the right price and real discipline and rigor, because we've worked super hard to accumulate this money, so we're not gonna fritter it away. all of those things are absolutely on the table along with the fact that under the right circumstances and it would require you know the right price and real discipline and rigor because we've worked super hard to accumulate this money so we're not gonna fritter it away If the right investment or acquisition opportunities come to us, we'll take those really seriously. if the right investment or acquisition opportunities come to us we'll take those really seriously As one of the, if not the only, public company in our segment of the fitness market, we are a pretty common port of call for companies looking for an exit. If, if we find the right one at the right price, we would at least seriously consider that. Those are some of the things that we can do with our excess cash. First and foremost, it's with the goal of serving our shareholders. As one of the, if not the only, public company in our segment of the fitness market, we are a pretty common port of call for companies looking for an exit. as one of the if not the only public company in our segment of the fitness market we are a pretty common port of call for companies looking for an exit If, if we find the right one at the right price, we would at least seriously consider that. if if we find the right one at the right price we would at least seriously consider that Those are some of the things that we can do with our excess cash. those are some of the things that we can do with our excess cash First and foremost, it's with the goal of serving our shareholders. first and foremost it's with the goal of serving our shareholders

Speaker 4: Great. Thanks, Brian. We have time for one last question. Operator? Great. great Thanks, Brian. thanks brian We have time for one last question. we have time for one last question Operator? operator

Speaker 5: Thank you. That final question will come from the line of Shweta Khajuria with Wolfe Research. Your line is open. Thank you. thank you That final question will come from the line of Shweta Khajuria with Wolfe Research. that final question will come from the line of shweta khajuria with wolfe research Your line is open. your line is open

Speaker 8: Thank you for taking my question. I guess, could you please talk to how you think about the evolution of the business? Certainly, you spoke to the trends that you're seeing in gross adds and retention, implying that net adds could be flat at some point and then turn positive. As your business evolves, how do you view the overall market opportunity across commercial business unit and partnerships like the one you just announced with Spotify versus hardware sales, whereby is net adds going to be a key metric for you if your revenue is coming from, you know, other diversified sources? How do you think about that? Thank you. Thank you for taking my question. thank you for taking my question I guess, could you please talk to how you think about the evolution of the business? i guess could you please talk to how you think about the evolution of the business Certainly, you spoke to the trends that you're seeing in gross adds and retention, implying that net adds could be flat at some point and then turn positive. certainly you spoke to the trends that you're seeing in gross adds and retention implying that net adds could be flat at some point and then turn positive As your business evolves, how do you view the overall market opportunity across commercial business unit and partnerships like the one you just announced with Spotify versus hardware sales, whereby is net adds going to be a key metric for you if your revenue is coming from, you know, other diversified sources? as your business evolves how do you view the overall market opportunity across commercial business unit and partnerships like the one you just announced with spotify versus hardware sales whereby is net adds going to be a key metric for you if your revenue is coming from you know other diversified sources How do you think about that? how do you think about that Thank you. thank you

Speaker 6: Yeah. Thanks, Shweta. I'll cover that. I mean, we try to be pretty practical and hard-nosed when it comes to the business. Quality revenue ultimately is what matters. By quality revenue, I mean revenue with good margins and ultimately really efficient cash flow generation from that. We know that a substantial fraction of that quality revenue for us comes today from connected fitness subscriptions, that is also an important metric to us. It's in service of the revenue metric. It's not an end metric in and of itself. That being said, we are acutely focused on that one because we recognize its importance in our profit generation in particular. We're incredibly excited about our ability to diversify this business, leveraging the power of the Peloton and the Precor brands. Yeah. yeah Thanks, Shweta. thanks shweta I'll cover that. i'll cover that I mean, we try to be pretty practical and hard-nosed when it comes to the business. i mean we try to be pretty practical and hard-nosed when it comes to the business Quality revenue ultimately is what matters. quality revenue ultimately is what matters By quality revenue, I mean revenue with good margins and ultimately really efficient cash flow generation from that. by quality revenue i mean revenue with good margins and ultimately really efficient cash flow generation from that We know that a substantial fraction of that quality revenue for us comes today from connected fitness subscriptions, that is also an important metric to us. we know that a substantial fraction of that quality revenue for us comes today from connected fitness subscriptions that is also an important metric to us It's in service of the revenue metric. it's in service of the revenue metric It's not an end metric in and of itself. it's not an end metric in and of itself That being said, we are acutely focused on that one because we recognize its importance in our profit generation in particular. that being said we are acutely focused on that one because we recognize its importance in our profit generation in particular We're incredibly excited about our ability to diversify this business, leveraging the power of the Peloton and the Precor brands. we're incredibly excited about our ability to diversify this business leveraging the power of the peloton and the precor brands The commercial business growth that we're experiencing is, one, because gym operators are so excited that Precor is back, right? We were such an important supplier to them for many years. I think we took our eye off the ball for a couple of years there. Gym operators, they're all telling us they can see it, that we're back, and that represents what we believe to be a sustainable source of high-quality revenue growth for many years into the future. Content licensing is another area that's attractive for us because it allows us to leverage the investment that we've already made in content, for our connected fitness subscribers and to generate additional high-margin revenue from that existing space. Going back to the commercial business, Peloton brand is woefully underexploited in that space. The commercial business growth that we're experiencing is, one, because gym operators are so excited that Precor is back, right? the commercial business growth that we're experiencing is one because gym operators are so excited that precor is back right We were such an important supplier to them for many years. we were such an important supplier to them for many years I think we took our eye off the ball for a couple of years there. i think we took our eye off the ball for a couple of years there Gym operators, they're all telling us they can see it, that we're back, and that represents what we believe to be a sustainable source of high-quality revenue growth for many years into the future. gym operators they're all telling us they can see it that we're back and that represents what we believe to be a sustainable source of high-quality revenue growth for many years into the future Content licensing is another area that's attractive for us because it allows us to leverage the investment that we've already made in content, for our connected fitness subscribers and to generate additional high-margin revenue from that existing space. content licensing is another area that's attractive for us because it allows us to leverage the investment that we've already made in content for our connected fitness subscribers and to generate additional high-margin revenue from that existing space Going back to the commercial business, Peloton brand is woefully underexploited in that space. going back to the commercial business peloton brand is woefully underexploited in that space Gym operators tell us every time we speak with them that the only brand that their members ask for by name is Peloton. We've had people lining up to see our products when we've demonstrated at recent fitness conferences. Those hardware sales will come with some subscribers just to tie those things back, but not at the same ratio as a household, right? Where you sell 1 piece of equipment, you know, that's basically shared by a couple of 1 or 2 people in that household. In the case of a gym, many people share the same piece of equipment. That's a little bit about how all those things relate to each other. Gym operators tell us every time we speak with them that the only brand that their members ask for by name is Peloton. gym operators tell us every time we speak with them that the only brand that their members ask for by name is peloton We've had people lining up to see our products when we've demonstrated at recent fitness conferences. we've had people lining up to see our products when we've demonstrated at recent fitness conferences Those hardware sales will come with some subscribers just to tie those things back, but not at the same ratio as a household, right? those hardware sales will come with some subscribers just to tie those things back but not at the same ratio as a household right Where you sell 1 piece of equipment, you know, that's basically shared by a couple of 1 or 2 people in that household. where you sell 1 piece of equipment you know that's basically shared by a couple of 1 or 2 people in that household In the case of a gym, many people share the same piece of equipment. in the case of a gym many people share the same piece of equipment That's a little bit about how all those things relate to each other. that's a little bit about how all those things relate to each other The evolution of the business is from connected fitness to connected wellness across all of the categories of cardio, both residential and commercial, strength, nutrition, mental wellbeing, sleep, recovery, realized through high-quality revenue with subscribers as a secondary metric that fuels that high-quality revenue. Thanks, Shweta. The evolution of the business is from connected fitness to connected wellness across all of the categories of cardio, both residential and commercial, strength, nutrition, mental wellbeing, sleep, recovery, realized through high-quality revenue with subscribers as a secondary metric that fuels that high-quality revenue. the evolution of the business is from connected fitness to connected wellness across all of the categories of cardio both residential and commercial strength nutrition mental wellbeing sleep recovery realized through high-quality revenue with subscribers as a secondary metric that fuels that high-quality revenue Thanks, Shweta. thanks shweta

Speaker 8: That was helpful. Thanks, Peter. That was helpful. that was helpful Thanks, Peter. thanks peter

Speaker 6: Before we wrap, knowing that many of the people who participate in this call are also our members, I wanna point out a few items that you shouldn't miss. First, check out the 2-for-1 strength class that features Adrian Williams co-star and Tunde, so you too can build muscles like Hudson. I also want to encourage you to join our live spring cross-training plan. Those classes have been dropping Monday through Friday, and they're also available on demand. Finally, if you're training for a marathon, be sure to try out our new Pace Your Race marathon program that proudly features our cast of global Tread instructors. With that, thank you for joining today, and please join me in wishing James Marsh a happy birthday. Before we wrap, knowing that many of the people who participate in this call are also our members, I wanna point out a few items that you shouldn't miss. before we wrap knowing that many of the people who participate in this call are also our members i wanna point out a few items that you shouldn't miss First, check out the 2-for-1 strength class that features Adrian Williams co-star and Tunde, so you too can build muscles like Hudson. first check out the 2-for-1 strength class that features adrian williams co-star and tunde so you too can build muscles like hudson I also want to encourage you to join our live spring cross-training plan. i also want to encourage you to join our live spring cross-training plan Those classes have been dropping Monday through Friday, and they're also available on demand. those classes have been dropping monday through friday and they're also available on demand Finally, if you're training for a marathon, be sure to try out our new Pace Your Race marathon program that proudly features our cast of global Tread instructors. finally if you're training for a marathon be sure to try out our new pace your race marathon program that proudly features our cast of global tread instructors With that, thank you for joining today, and please join me in wishing James Marsh a happy birthday. with that thank you for joining today and please join me in wishing james marsh a happy birthday

Speaker 5: Thank you. This concludes today's program. Thank you all for participating. You may now disconnect. Thank you. thank you This concludes today's program. this concludes today's program Thank you all for participating. thank you all for participating You may now disconnect. you may now disconnect